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Banks Are Losing Belarusians' Money

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Banks Are Losing Belarusians' Money

"Internal" sanctions against the regime are working!

Not so long ago - 1.5 years ago - the population was the main "supplier" of financial resources for the second-tier banking system of Belarus: the share of citizens' funds in total bank liabilities reached a third of all, writes Infobank.

But the events of 2020, namely, the spring covid crisis and the autumn political crisis, both accompanied by the withdrawal of deposits from banks and the devaluation of the BYN-ruble, significantly changed the structure of liabilities: the share of individuals' funds decreased, banks lost a significant amount of money, estimated to billions of BYN rubles.

This continued in 2021. And now the share of citizens' funds in the liabilities of second-tier banks is already less than a quarter and is no longer in the first place: they were exceeded by funds of economic entities. And the difference continues to grow.

The liabilities of the banking system are the resource base of banks, from which they draw funds to fulfill their main function - lending.

It can be equity capital, but, mainly, it is clients' money: funds of legal entities and individuals of domestic and foreign jurisdiction placed in their deposits in national and foreign currencies. As well as borrowed funds both from abroad (including from parent banks) and refinancing by the National Bank.

Their own money - equity capital - in liabilities is only 15.3%. In addition, there is also non-resident money in the form of a contribution to the authorized capital of banks.

The largest share in liabilities is occupied by accounts and deposits of business entities and individuals: in total, they account for more than half of the entire resource base.

A significant share of liabilities is occupied by funds of non-residents - both in the form of deposits placed in Belarusian banks and loans issued to Belarusian banks (external bank debt, “liabilities to non-residents”).

The sum of Belarus' banking system liabilities amounted to 90.189 billion BYN at the end of May 2021. It has increased by 11.845 billion BYN or 15.1% for 17 months compared with the beginning of the crisis year in 2020.

Although, according to the GDP deflator, the general inflation in the country for this period is over 20%: in real terms, liabilities have decreased.

At the same time, in absolute nominal terms, the funds of business entities grew the most in liabilities - by BYN 4.033 billion, and in relative percentage terms - funds of the National Bank - by 27.8 times.

However, funds of individuals in bank liabilities decreased by BYN3.070 billion (12.1%). This is a direct result of the impact of the events of 2020: in every crisis, the Belarusians strenuously withdrew their deposits.

During the spring covid crisis, mostly BYN-ruble deposits were taken out, and during the autumn political crisis - mostly foreign currency deposits. The withdrawal continues in 2021 - across the entire currency spectrum of fixed-term deposits of individuals.

Thus, the above-mentioned real (taking into account the GDP deflator) decrease in the banking system's liabilities is the result of the population's reaction to the economic and political situation in the country.

The reduction in the volume of funds of individuals led to a drop in their share in liabilities below the share of funds of economic entities: for the first time in 8 years, this happened in November last year.

And by this time, the difference has only increased: the share of the population's funds continues to fall, while that of economic entities continues to grow.

This is the main structural change in the liabilities of the banking system of Belarus in 2020, which continues in 2021: banks continue to lose people's money.

Over the past 17 months (for 2020 and 5 months of 2021), the share in the structure of liabilities has changed as follows:

equity capital - increased by 0.6 percentage points

funds of business entities - increased by 2.9 p.p.

funds of individuals - decreased by 7.8 p.p.

funds of non-residents - increased by 1.2 p.p.

funds of government bodies - increased by 0.4 p.p.

the rest of the liabilities in total - increased by 3.3 p.p.

The volume of liabilities of each specific bank determines its financial and credit capabilities. And the total, all banks in the country, the volume of liabilities sets and determines the financial capabilities of the state as a whole.

At the end of May 2021, the amount of liabilities of the Belarusian banking system was 90.189 billion Belarusian rubles. Whereas at the beginning of 2020, it was 78.345 billion BYN.

The increase since the beginning of 2020 (over 17 months) - by BYN 11.845 billion or 15.1% - was mainly due to the revaluation of liabilities in foreign currency due to the growth of foreign exchange rates, as well as inflationary growth. As, however, always before.

The record size - BYN 91.15 billion - was recorded at the end of August 2020, exactly at the time of the highest dollar exchange rate at that time, as well as before the massive withdrawal of deposits by the population against the backdrop of the political crisis.

In dollar terms, the total liabilities of the banking system of Belarus at the end of May 2021 amounted to $ 35.61 billion.

The historical maximum was 10 years ago - in 2011, before the devaluation of the BYN ruble - $44.75 billion, while the pre-devaluation peak at the end of 2014 was $42.89 billion, followed by the fall.

That is, the financial capabilities of the banking system of Belarus in the international (in US dollars) definition are now at the level of 7 years ago.

The decline in the volume of liabilities in dollar terms since the beginning of 2020 amounted to $ 1.592 billion or almost 4.3%: 17 months ago, the amount of liabilities amounted to $ 37.20 billion. This reduction is a result of both the devaluations in 2020 and the withdrawal of deposits by the population for almost the whole time.

According to the most recent data of the National Bank on the average broad money supply - for June 2021 - the withdrawal of money from banks by the population not only continued but even accelerated.

It was especially strong from transferable BYN-deposits of individuals (there is less money on BYN-ruble payment cards) and from term deposits in foreign currency.

There was also a decrease in BYN time deposits and transferable deposits in foreign currency.

That is, everywhere. This means that the share of money of the population in the liabilities of banks in June fell again, and very strongly.

This is another evident reaction of the Belarusians to the deterioration of the foreign political situation. And this despite the fact that the EU sanctions were adopted at the end of June and have not even begun to take effect. Therefore, it is hardly possible to stop this process of people withdrawing money from banks without a radical improvement in the external situation.

The banks will continue to lose people's money in the near future, and the share of individuals' funds in liabilities will continue to decrease.

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