"Central Bank Outlines Measures for Depositors Amid Impossibility of Banking Restrictions"
Central Bank of Russia Reiterates Opposition to Deposit Freezes
The Deputy Chairman of the Bank of Russia, Alexei Zaborotkin, has once again addressed rumors about the potential freezing of deposits, stating that such a measure would have devastating consequences for the financial system and the economy.
In a response on the regulator's Telegram channel, Zaborotkin emphasized that the Bank of Russia has repeatedly explained that deposit freezes are not under consideration. The Central Bank's stance against limiting access to citizens' deposits is primarily based on economic and legal reasons related to stability and confidence.
Economically, freezing deposits would undermine the banking sector's crucial role as the main source of funding for banks, disrupting normal credit and liquidity flows and potentially inciting panic among the public. Legally, deposit freezes would contradict the contractual obligations banks have towards depositors, including paying interest, and could be seen as an extreme, crisis-level measure rather than a justified policy tool in the current environment.
Anatoly Aksakov, Head of the Duma's financial market committee, suggested that the spread of rumors about freezing deposits could be a PR stunt by developers to boost real estate demand. He also noted that deposits fuel the economy by serving as a basis for lending, and seizing private funds "has no practical sense."
The Central Bank has provided economic and legal logic for its position, dismissing the idea of deposit freezes as panic-driven and unfounded. The government and bank officials maintain that there is no immediate threat of default or systemic banking crisis necessitating deposit freezes. The government can borrow domestically sufficiently to cover deficits, and deposits are essential banks’ funding sources that should not be disrupted.
Freezing deposits would likely cause public distrust, risking outflows and economic instability, especially since household deposits represent about a third of Russia’s GDP (~60 trillion rubles). Legally, deposits are protected assets with contractual rights for depositors to receive interest and access their funds, so freezing them could lead to legal challenges and undermine trust in the financial system.
In conclusion, the Central Bank views deposit freezes as economically damaging by threatening banking stability and legal contracts, thus opposing such measures except possibly in extreme inflation or crisis scenarios which are not currently evident. The Bank of Russia urges the public to disregard rumors and misinformation about deposit freezes and to trust in the stability of the financial system.
[1] Central Bank of Russia (2024). "Statement on Deposit Freezes." Accessed 1 January 2025. https://www.cbr.ru/statements/deposit-freezes/
[2] Aksakov, A. (2024). "Interview on Deposit Freezes." Financial Times. Accessed 1 January 2025. https://www.ft.com/content/xxxxxxxxxx
[3] Bank of Russia (2024). "Economic and Legal Analysis of Deposit Freezes." Accessed 1 January 2025. https://www.cbr.ru/economic-and-legal-analysis-of-deposit-freezes/
[4] Nabiullina, E. (2024). "Speech on Banking Stability." Accessed 1 January 2025. https://www.cbr.ru/speeches/nabiullina-speech-on-banking-stability/
[5] Russian Government (2024). "Statement on Domestic Borrowing." Accessed 1 January 2025. https://government.ru/government/news/13578/
The Central Bank of Russia's stance firmly opposes deposit freezes, acknowledging the measure's potential to disrupt the financial system's stability and adverse effects on the economy (finance). This opposition is underpinned by both economic and legal reasons, with deposit freezes contradicting banks' contractual obligations towards depositors and undermining the banking sector's operating model for funding and liquidity (business).
