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Report: Russia ponders introduction of negative interest rates on euro deposits

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Report: Russia ponders introduction of negative interest rates on euro deposits

Russia's central bank will discuss with local financial institutions the possibility of introducing negative interest rates on household deposits in euros, Vedomosti reported Oct. 11.

The need to consider the introduction of negative interest rates on foreign-currency deposits stems from the policy pursued by the European Central Bank, according to Elvira Nabiullina, governor of the Central Bank of the Russian Federation.

"We see that negative rates, especially for the euro, are not a short-term phenomenon; they will most likely become long-term in connection with the monetary policy of leading countries, including the ECB," she said.

Under Russian law, banks are not allowed to hold negative interest rates on deposits, but they recently approached the regulator with a request to introduce such rates on foreign-currency deposits. The central bank agreed to assess the request, although its deputy head Sergey Shvetsov initially said that the potential changes would only apply to forex deposits from companies.

Many Russian retail banks have lowered their interest rates on euro deposits to 0.01% per annum or have completely withdrawn them from their product offer, while some lenders also introduced or are considering the introduction of fees for servicing current accounts held in euros, Vedomosti said.