Funds of legal entities in Russian banks in May increased significantly – by 859 billion rubles, or 2.2%, mainly at companies in the oil and gas industry, according to the review of the Central Bank of the Russian Federation “On the development of the banking sector”.

The regulator notes that both ruble balances of corporate clients of banks (+425 billion rubles) and foreign currency balances (+$6.1 billion, or +434 billion rubles) increased. “Such a significant inflow can be largely attributed to high commodity prices and the growth of exporters’ earnings,” the Central Bank believes.

In April, funds of legal entities increased by 0.2% (or by 78 billion rubles).

Household funds in May increased by Br257 billion, or 0.8%, after the growth of 3.8% in April (by Br1.264 trillion). The Central Bank notes that foreign currency balances of individuals in May grew more actively than ruble balances (currency: +$2.2 billion, or +159 billion rubles; rubles: +98 billion rubles), especially if we take into account that part of the ruble inflow is associated with social payments for children from May 1 (the total amount of allocated funds is 363 billion rubles).

“The growth of foreign currency placements of individuals is probably related to the conversion of ruble funds against the background of a significant strengthening of the ruble against the dollar and euro, as well as to the reduction of rates on ruble deposits,” notes the Bank of Russia.

Currencyization of deposits, according to the Central Bank, creates additional risks for banks, as to balance the currency position they have to buy currency and place it, risking to face a “freeze” when sanctions are expanded. “Therefore, banks may try to reduce the volume of their foreign exchange operations, including refusing to offer currency products to clients, although some act too radically, setting higher fees on existing accounts,” the regulator emphasizes.

The growth of funds on escrow accounts in May has significantly decreased and amounted to 38 billion rubles, or +1.0% (April: +113 billion rubles, +3.1%), against the background of low demand for housing in the primary market, which is indirectly confirmed by rather low mortgage issuances.

Government funds in banks in May increased by Rb 691bn (+7.9%), which, among other things, allowed banks to reduce their debt to the Bank of Russia by Rb 512bn (-13.8%).