The hike in reserve requirements follows a June 10 increase by Russia's central bank in the reserve requirement on bank's foreign currency liabilities by 100 basis points, a move that was also taken to discourage banks from lending to Russians in foreign currencies.
At that point, the reserve ratio on ruble lending was left at 4.25 percent but the central bank said on June 10 that it was ready to take measures to mop up liquidity in light of a shift to surplus in the banking sector.
As of Aug. 1, the reserve ratio on banks' liabilities in foreign currency will be raised to 7.00 percent from 6.25 percent that was scheduled to go into effect on July 1, while the ratio on lending in rubles, other than to individuals, will rise to 5.0 percent from 4.25 percent.
The Bank of Russia issued the following statement:
"The Bank of Russia will increase required reserve ratios by 0.75 percentage point from 1 August 2016 on credit institutions’ liabilities in the currency of the Russian Federation and in the foreign currency. This measure will make it possible to absorb the part of the liquidity inflow resulting from the Reserve Fund spending to finance the budget deficit and discourage growth of foreign currency denominated liabilities in the liability structure of credit institutions.
The following required reserve ratios will be introduced from 1 August 2016:
- required reserve ratio on liabilities to non-resident legal entities in the currency of the Russian Federation — 5.0%;
- required reserve ratio on liabilities to non-resident legal entities in the foreign currency — 7.0%;
- required reserve ratio on liabilities to individuals in the currency of the Russian Federation — 5.0%;
- required reserve ratio on liabilities to individuals in the foreign currency — 6.0%;
- required reserve ratio on other liabilities in the currency of the Russian Federation — 5.0%;
- required reserve ratios on other liabilities in the foreign currency — 7.0%.
The introduced ratios will be in effect to regulate required reserves of credit institutions over the reporting period from 1 August 2016 to 1 September 2016. The required reserve averaging ratio used by credit institutions to calculate the required reserve averaged value remains unchanged."