Usurious Russia as a paradise for international dealers

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

We constantly say that interest rates on bank loans in Russia are high. But everything is learned by comparison. Maybe we exaggerate, exaggerate? I offer readers some comparisons of Russia with other countries. And then we will try to understand the reasons and meaning of country differences.

A comparative analysis of interest rates on loans to the population by banks of the Russian Federation and a number of other countries (Germany, USA, Greece) was carried out by experts of the information resource BancRF.ru. The study reflects the picture as of mid-2018. Loans comparable in terms and volumes were considered. They were all non-targeted. To obtain information on each country, five banks were taken; the choice of banks was arbitrary.

For each country, the maximum and minimum rates were taken, and then the average (arithmetic means) were calculated. The following picture turned out (%): Germany - 4, 92; USA - 12, 79; Greece - 12, 41; Russian Federation - 18, 52. It turns out that in Russia loans to the population are on average one and a half times more expensive than in the USA or Greece, and 3, 8 times more expensive than in Germany. The only consolation for Russia is that in Ukraine, according to the same study, the average rate was 48.86% (which, by the way, is one of the highest rates in the world).

And here is another review, it allows you to compare interest rates on mortgage loans in Russia and other countries. The picture reflects the situation at the beginning of the current, 2019, year. The leaders in the most favorable terms of mortgage loans are three countries: Finland, Switzerland, Japan. In Japan, the average annual rate on such loans is about 1.2%. The terms for which loans are issued are about 50 years. In Finland, the rate is in the range of 1, 1-1, 5%, and the term is also about half a century. But in Switzerland, loans are called "lifelong mortgages", since their terms can stretch up to 100 years. And the rate is only 1, 4-1, 6% per annum.

Next comes a fairly large group of countries with interest rates from 1.5 to 3.5% per annum. These countries are (in brackets - the value of the rate): Germany (1, 5-2, 0); Luxembourg (1, 8); Sweden (1, 87); Slovakia (1, 90-1, 92); France, Lithuania, Denmark, Czech Republic, Estonia (all in the range 2-2, 2); Belgium, Italy (2, 2-3, 0); Great Britain, Austria, Portugal, Netherlands (2, 5-3, 0); Spain, Latvia (3, 0); Italy, Greece, Malta, Romania (3, 5).

This is followed by a group of countries with moderate interest rates ranging from 3, 5 to 6, 0. These are the following countries: Poland (3, 7-4); Ireland (3, 8); Cyprus (4, 0); Bulgaria (4, 5-5, 0); Croatia (5, 0-6, 0); Hungary (6, 0).

What are the indicators of the interest rate in Russia? At the beginning of this year, according to various estimates, the weighted average rate on mortgage loans issued by Russian banks was at the level of 10 percent per annum. As you can see, the gap in the rate between Russia and the countries I have named above is colossal. And this despite the fact that the terms of mortgage loans in Russia are very short. Last year the average term was 14 years. This year, however, according to the Central Bank, it has increased to 17 years.

Again, Ukraine can provide some consolation for the citizens of Russia. The conditions for mortgage loans there are simply outrageous. The rate averaged at the beginning of the year from 17 to 22% per annum. At the same time, the cost of housing is also not small. The mortgage there has an average term of 10 years. Thus, you will have to pay three prices for the apartment. The situation was worse than in Ukraine in Argentina. Interest rates there were 26-28% per annum. But it should be admitted that today, in terms of mortgage loans, Russia is closer to Ukraine and Argentina than to Finland or Japan.

Yes, it is clear that usury has taken over most of the world today. But in terms of the level of interest rates on loans, Russia is in the group of leading countries. The reason for this situation is obvious - the monetary policy of the Russian Central Bank.

The Central Bank sets the "temperature" (interest rates) in the credit market in any country with the help of such a regulating device as the key rate. In simple terms, the key rate is the minimum percentage at which the Central Bank can lend to commercial banks, and at the same time it is the maximum percentage at which it is ready to accept funds from them for deposits.

When the world financial crisis of 2007-2009. reached its climax, the central banks of the countries of the "golden billion" began to cut key rates quite decisively. The Federal Reserve in 2008 lowered the key rate almost to the "plinth", that is, to 0, 00-0, 25%. At this level, he kept it right until the end of 2015 (when the first increase by 25 basis points was made). Approximately the same was the trajectory of the key rate at the European Central Bank (ECB), Central banks of many European countries (not included in the Eurozone), and other countries of the "golden billion". But in Russia, the interest rate of the Central Bank (earlier it was called the refinancing rate) moved in the opposite direction. So, back in 2013, the rate was 5.50%, and by the end of 2014 it had soared to a record level of 17.0%.

A rough formula for calculating the average interest rates on loans from commercial banks in our country: double the rate of the Bank of Russia and you will get an idea of the price of bank loans for individuals and companies. Consequently, over the specified period of time, the average interest rates on loans in Russia soared from about 11 to 34%. Loans that are absolutely prohibitive in price, which ruin both the population and business.

Since December 2014, an extremely cautious reduction in the key rate of the Central Bank began, and only by the middle of this year was it possible to cut its maximum value by half - to 7.5%. In the second half of this year, three more reductions were made, and at the moment the key rate of the Bank of Russia is 6.5%. Against the background of the key rate indicators of the last five years, it seems to be not bad. Let's see what are the key rates of other central banks at the moment:

US Federal Reserve - 1, 50-1, 75

ECB - 0, 00

Bank of Japan - minus 0, 10

Bank of England - 0.75

Swiss National Bank - minus 0.75

Bank of Sweden - minus 0.25

National Bank of Denmark - 0.05

Reserve Bank of Australia - 0.75

Bank of Canada - 1.75.

All of the above-mentioned central banks are from the zone of the countries of the "golden billion". Outside it, the picture of key rates is quite different. So, in Turkey it is currently 14% (and six months ago it was 24%). Mexico has 7.5%. The key rate of the Bank of Russia is much closer to the indicators of developing countries than the “golden billion”.

Let's see what are the key rates for the countries of the BRICS group, which includes Russia:

People's Bank of China - 4, 15

Reserve Bank of India - 5, 15

Central Bank of Brazil - 5.00

South African Reserve Bank - 6, 50.

As you can see, in the BRICS group, Russia and South Africa have the highest key rates. The lowest is in China.

It is noteworthy that the People's Bank of China kept the key rate at the same level (4.35%) for a long time, and since the end of August this year it managed to cut it three times. Judging by a number of signs, the NBK intends to continue its downward course. Recently, the Global Times, the official mouthpiece of the Communist Party on international politics, posted an article under the sensational headline "China needs to prepare for zero interest rates." Experts believe that this is China's claim that it, together with the countries of the "golden billion", is taking a course for a consistent and decisive cut in the key rate.

Experts are wondering: will the Bank of Russia continue to further reduce the key rate to the level when Russian enterprises in the real sector of the economy will finally be able to take out loans without risking themselves? They will be willing to take it when the interest rates on loans from commercial banks are comparable to the profitability of enterprises. Profitability by industry (judging by Rosstat data) is very different. But on average, the "temperature in the hospital" is somewhere around 5 percent. Therefore, the key rate at which a healthy appetite for loans from commercial banks will arise in the real sector of the economy should be 2.5 percent, maximum three percent.

But I think that we will not wait for such a “miracle” under the current leadership of the Bank of Russia. But some may object to me: today there is a global trend towards a new round of cuts in key rates in the world. And they will give examples. So, Trump urges the US Federal Reserve Chairman Jerome Powell that the American Central Bank, like some other Central Banks, lower the key rate to zero, or even better - below zero. So in Europe, the new ECB President Christine Lagarde hints that the zero key rate for the eurozone is no longer enough, and that it may acquire a negative value in the near future. And the People's Bank of China, as I noted above, wants to fit into the new world trend.

It could be assumed that, taking into account the emerging trend in the world, the Central Bank of Russia should continue to reduce the key rate. From my point of view, everything will be the other way around. The central banks of the countries of the "golden billion" (plus the Central Bank of China) will lead the financial and money markets into negative territory, and it will be extremely difficult there to make a profit (of course, speculators today are learning to make money even in conditions of "freezing temperatures" in the markets, but still it is much more difficult). They will try to compensate for their losses or reduced profits at the expense of "warm oases".

What are these "warm oases"? And these are the countries where the "positive temperature" will be maintained, that is, interest rates will not only be positive, but even very positive. I have already drew the readers' attention above to the fact that the Bank of Russia after the financial crisis of 2007-2009. acted in antiphase in relation to the Central Banks of the countries of the "golden billion": they sharply lowered rates, and our Central Bank sharply raised rates. Such a difference in "temperatures" is necessary so that international financial marauders can enter Russia with cheap (or even free) money, and then leave it with a "gain" obtained at the expense of high interest rates inside. As a result of the policy of the Central Bank, Russia was turned into an "oasis" for financial marauders. Speculators in this "oasis" five years ago staged a collapse of the national currency (the ruble in December 2014 depreciated by half).

The Bank of Russia is fooling people by claiming that it sets the key rate taking into account such a “higher goal” as “inflation targeting”. No, he sets the key rate exclusively on the teams of the “owners of the money”. And they currently need the Bank of Russia to maintain a good "plus temperature" in the Russian "oasis". International financial marauders will have a place to “warm their hands” in the face of the coming global interest rate “cold snap”.