Russian banking system’s foreign currency balance demonstrates record-breaking hole

The negative net foreign exchange assets of the banking sector reached a historic high of $15bn as of May 1. The statistics of the Bank of Russia was analyzed for RIA Novosti by Maxim Osadchiy, bank BKF’s Head of the Analytical Department. 

Net foreign exchange assets or non-zero open foreign exchange position is the difference between foreign exchange assets and liabilities. And since Russian banks do not have foreign exchange capital, net foreign exchange assets are equal to the difference between foreign exchange assets and liabilities, and negative net foreign exchange assets are a hole in the foreign exchange balance, the analyst explained. 

Negative net foreign exchange assets were formed in November and grew steadily until May, he added.

“The formation of negative net foreign exchange assets means that banks' foreign exchange liabilities exceed their foreign exchange assets. In essence, the banks are betting, without taking into account their off-balance sheet positions, on strengthening the ruble,” Osadchy said. 

For example, on May 1, the foreign currency cash reserves in Russian banks amounted to mere $12.2bn, while the amount of cash in foreign currency held by the population reached $91.3bn, he concluded.