Commercial banks tighten lending policies for population and business and de facto implement own exchange rate policy

April 22, 2016 17:53

Although the majority of the Belarusian banks continue providing loans to businesses in foreign currency, the rules became considerably more complicated. Moreover, banks are likely to deny a loan, if the planned revenue is denominated in Belarusian rubles.

At the same time, some banks temporarily stopped issuing foreign currency loans to businesses or introduced restrictions. Additionally, banks increased the interest rates on ruble loans to the population and made the issue of consumer and mortgage loans more sophisticated. 

A number of commercial banks gave up waiting for the official announcement of the devaluation and dropped the cost of the Belarusian ruble by 20-30%. The “devaluation” affected the settlement of the foreign currency loans in U.S. Dollars and transactions via Belarusian ruble bank cards outside Belarus. 

Comment

Commercial banks, regardless of the record-high profits last year, do not wish to be donors to the public or businesses, and in the current situation, care about their own profits rather than follow “recommendations” of the National Bank. Therefore, first of all, banks have seriously cut the withdrawal limits for the ruble cards when withdrawing currency abroad, and then introduced the 20-30% commission, regardless of the recommendation of the NBoB not to go beyond the 10% corridor. A similar situation is around translating foreign currency loans into Belarusian rubles, i.e. some banks use the exchange rate of BNB +30%. 

One can already talk about the loss of control over the banking system of the country (so-called administrative resources ( guidelines) do not work) or a reluctance of the NBoB and other controlling bodies to create additional problems artificially and worsen the financial state of banks, most of which are owned by foreigners.

One can already talk about the loss of control over the banking system of the country (so-called administrative resources ( guidelines) do not work) or a reluctance of the NBoB and other controlling bodies to create additional problems artificially and worsen the financial state of banks, most of which are owned by foreigners.  

On 29 April the National Bank issued a rather alarming statement, calling on commercial banks to “value their customers”. Some interpreted this call as a sign of the continuing outflow of the deposits from the banking system. 

The Presidential Decree No 173 of 22 April 2011 transferred the authority over the National Investment and Privatization Agency from the Government to the Ministry of Economy of Belarus. 

Comment

The issue of subordination of the Agency has long been a subject of intrigue, initially, there was no unclear division of responsibilities between the Agency and the State Property Committee, i.e. who would be responsible for the privatization of state property. Now it is clear that the SPC will deal with the privatization, while the Agency will to try to attract the FDI in the so-called “green filed” projects, i.e. newly established businesses. 

The decree has a positive effect by ruling out the conflict of interests, clarifying the scope of responsibility for investors, also it retained the capabilities of the SPC which can quickly and efficiently implement a mass privatization programme, given there is a political will for it (the SPC has experienced staff, while the agency staff needs to be recruited from the outside).