Christ Yoder
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Russian banks do not endorse the majority of calls for financial support from consumers and businesses seeking emergency financing under government programs to mitigate the economic damage caused by the coronavirus, the central bank has confirmed .
Governor of the Central Bank Elvira Nabiullina noted The use of cheap loans and repayment holidays for struggling businesses and individuals on Friday started “slowly”, noting that the central bank expects banks to increase approval rates for those who apply. as part of government-supported initiatives.
The Central Bank said 900 companies requested a total of 6 billion rubles ($ 81 million) in interest-free loans to cover staff salaries, under a scheme in which the government would subsidize banks to cover the cost of cheap loans. As of Friday, only 76 million rubles ($ 1 million) had been approved, or 1.2% of the amount requested.
“The system is changing very slowly. This cannot satisfy us and does not correspond to the seriousness of the problem, so we will work with the banks to make this mechanism work, ”Nabiullina said at a press conference on Friday.
Russia’s biggest banks have also turned down 85% of requests from borrowers seeking emergency loan restructuring. While the government has ordered banks to offer a six-month break in repayments to debtors who see their income fall by 30% or more, data has shown that in the brief period after the plan was announced , but before it officially went into effect, lenders rejected 65,000 of the 76,000 claims they received, even as the number of appeals more than doubled.
The statistics come amid growing warnings of the economic damage the coronavirus will inflict on Russia. Alexei Kudrin, the head of the Russian Chamber of Accounts, said on Monday that unemployment could triple this year, leaving 8 million Russians out of work unless the government steps in with a more generous support package.
“The Ministry of Finance has so far set aside 1,400 billion rubles [$19 billion] – 1.2% of GDP – funding for anti-crisis support, ”Deutsche Bank economists noted in a recent research paper. “The obligation of companies to continue paying wages during the lockdown will strain companies’ cash flow and will require additional state support.”
The document adds: “Although the focus has been on mitigating the income shock to households – understandable after the fall in real incomes after 2014 which increased dissatisfaction with living standards – additional measures to support business will be needed to minimize economic scars. However, the authorities’ prudence and the oil price shock will limit the scope of the fiscal response.
