Russian Banks Say Digital Ruble Will Drive up Loan Rates – New CBDC Dangers?
A major Russian banking association has warned that the digital ruble will drive up loan rates as banks struggle to cope with the soon-to-be-issued CBDC.
The Central Bank last month launched an 11-city “real-world” CBDC pilot in conjunction with 13 commercial banks.
But banking organizations have already expressed “concern” about the project, and the Central Bank was rocked by the eleventh-hour withdrawals of heavyweights Sberbank and Tinkoff Bank.
Per Izvestia, the Association of Banks of Russia Vice-President Alexey Voylukov said the CBDC project could see loan rates rise by 0.5%.
He said:
“If we take into account the direct and indirect costs of introducing the digital ruble, the cost of money for lending will climb even higher.”
The comments come over a month after the association sent a letter to the Central Bank with “a request to clarify certain issues pertaining to the digital ruble.”
The association claimed that citizens were “wary” of the coin.
Business leaders, meanwhile, have also expressed their reservations.
Izvestia also spoke to other experts, who issued similar warnings.
Georgy Vashchenko, the Deputy Director of the analytical department at Freedom Finance Global, claimed that banks could be hit to the tune of over $31 billion.
Vashchenko said there was a “risk of banks losing about 5% per year in profits.”
The investment banker and National Research University Higher School of Economics professor Yevgeniy Kogan also echoed the sentiments.
Kogan said:
“The head of the State Duma’s [Financial Markets] Committee, Anatoly Aksakov, has stated that as the CBDC is introduced, the Russian banking system will gradually fade away. It’s interesting to note that, just recently, the Central Bank assured the sector that this would not happen.”
A Rosbank executive opined:
“The main concern that financial institutions and Russian banks have is that a chunk of their assets will flow out of the banking system into to digital ruble wallets.”
Chinese lenders extend billions of dollars to Russian banks after western sanctions https://t.co/0Q0ZFCuy33
— FT Economics (@fteconomics) September 3, 2023
Russian Banking Sector Facing CBDC Threat?
Other experts agreed that any additional business commercial banks accrue as a result of processing CBDC transactions would likely be dwarfed by the same banks’ digital ruble-related losses.
However, others claimed that the dangers of CBDC issuance had been exaggerated.
Timur Nigmatullin, a senior investment consultant at the Finam Financial Group, claimed that it was clear from the example of China that Russian banks are safe for the time being.
Nigmatullin noted that Chinese state organs were only now beginning to pay their employees in digital yuan tokens, despite the fact that the pilot began in early 2020.
As such, he stated,
“It is unlikely that, at least in the near future, the digital ruble will become a significant factor for the [Russian] banking system.”
