- The Russian central bank has denied rumors of freezing retail bank deposits.
- Freezing deposits would harm financial stability and undermine confidence, the bank said.
- Last year, the central bank raised rates to 21% in an attempt to calm Russia’s wartime economy.
The Central Bank of Russia used Telegram to publicly deny rumors that its citizens’ bank deposits could be frozen.
The bank wrote in a Telegram post on Monday that the idea that retail bank deposits could be frozen was “absurd” and “unthinkable.”
“In addition to the fact that this is a blatant violation of the right of citizens and businesses to manage their assets, such a measure would undermine the foundations of the banking system and the financial stability of the country,” wrote the regulator.
The concerns emerged after Elvira Nabiullina, Russia’s central bank governor, raised rates to 21% late last year in a bid to curb soaring inflation – an economic problem that the President Vladimir Putin acknowledged.
High interest rates attracted a flood of bank deposits. Recently, rumors emerged that individuals’ deposits could be frozen, prompting Russians to bombard the central bank with questions, the bank wrote in its Telegram post.
“It is obvious that in any market economy, of which bank loans are an integral part, such a measure is unthinkable,” the bank wrote in its message, denying the rumors.
Rumors about freezing deposits reflect the wartime nervousness of the Russian economy.
This is not the first time that the Russian central bank has expressed concern about the risk that Russians’ savings will be frozen and interest withheld.
In November, Nabiullina called the concerns “absurd,” according to Russian newspaper RBC. She was responding to a question from the lower house of the Russian parliament.
Russia has been under a series of Western sanctions since it invaded Ukraine in February 2022. It has managed to avoid bankruptcy, in part thanks to the growth of its massive spending on military activities and defense. He also managed to pivot to alternative export markets like China and India.
But Russia’s central bank has warned that the economy risks overheating.
The Russian economy faces problems such as high inflation, a falling value of the ruble and a serious labor shortage.
In November, the country’s inflation rate reached almost 9%. Prices of basic goods such as butter and potatoes have risen sharply in the country, putting a strain on the finances of ordinary citizens.
A Swedish economist wrote Tuesday that as the war in Ukraine approaches the fourth year, the Russian economy could run out of cash before the end of this year. This could harm its ability to continue financing the war and its economy.
