MOSCOW, May 14: Russia’s central bank said on Monday it would raise minimum reserve requirements for banks from July 1 to fight inflation pressures caused by large capital inflows.
A series of major business deals is sucking huge sums into Russia. They include asset sales of bankrupt oil firm YUKOS and the world’s largest stock market float this year by Russia’s No.2 bank VTB.
“The current situation is characterised by continued capital inflows into Russia that require measures aimed at smoothing possible inflationary effects linked to this process,” the bank said in a statement.
The bank will raise reserve requirements on non-residents’ deposits at Russian banks in both Russian and foreign currency to 4.5 per cent from 3.5 per cent. Requirements on individuals’ rouble deposits will rise to 4 per cent from 3.5 per cent.
The reserves amounted to 209.6bn roubles ($8.1bn) as of April 1, according to central bank figures. Russian banks owed over $100bn to foreigners as of Jan. 1.
The move means banks will need to set more money aside at the central bank when borrowing from their counterparts abroad, issuing eurobonds or taking deposits from individuals in Russia.
Analysts see the measure as helping the central bank tie up about 40 billion roubles. The government is about to inject 680 billion roubles under a spending drive announced by President Vladmir Putin last month.
The hike in reserve requirements amounts to a tightening of monetary policy and poses less of a risk on the capital account than would a hike in interest rates, which would probably attract further inflows of speculative money. —Reuters
