Russians moved more FX holdings to foreign banks in 2022 -central bank

5:47 am Tuesday, April 11th, 2023

By Elena Fabrichnaya

MOSCOW (Reuters) – Russians’ foreign currency holdings at foreign banks exceeded those held at domestic ones last year, the central bank said on Tuesday, in a shift driven by Western sanctions, commissions on FX accounts and Moscow’s efforts to reduce dollar assets.

Sanctions imposed against Moscow over the conflict in Ukraine and countermeasures introduced by Russian authorities, including restrictions on FX withdrawals, have reduced Russians’ access to hard currency in the past year.

“Residents’ accumulation of foreign currency assets has shifted abroad against the backdrop of sanctions pressure and the introduction of commission by a number of banks on FX accounts,” the central bank said in an overview of Russia’s financial sector in 2022.

It added that the country’s fostering of a drive to reduce exposure to foreign currencies had also played a part.

Central bank data showed that Russians’ deposits with foreign banks reached $94 billion last year.

“Not all these funds are actually savings,” the bank said. “They may partially have been spent on parallel import purchases. Also, a certain part of funds in accounts abroad may have been used by citizens leaving Russia to cover their living needs.”

Moscow has been pushing a so-called “parallel imports” scheme to help Russian consumers maintain access to a host of foreign products as western companies have exited the market over Russia’s actions in Ukraine.

Many Russians, meanwhile, have opted to leave the country fearing retribution or military call-ups.

The foreign currency holdings by Russian nationals have shifted towards those of ‘friendly’ currencies, primarily China’s yuan, with depositors concerned their funds may be blocked. Moscow considers countries that imposed sanctions as ‘unfriendly’.

The yuan has become a major player, with its share in Russia’s import settlements jumping to 23% from 4% last year, but the share of dollar and euro deposits in Russian banks remains significantly higher, the central bank said.

(Reporting by Elena Fabrichnaya; Writing by Alexander Marrow; Editing by Andrew Heavens and Mike Harrison)