Andrey Kostin, the CEO of VTB, Russia’s second-largest bank, has expressed the urgent need for the country to close loopholes that permit unregulated capital outflows. Kostin argues that the current situation is detrimental to the ruble and calls for measures to support the Russian currency.
In an interview with the RBK news agency on Monday, Kostin highlighted that while there are restrictions on residents sending more than $1 million or its equivalent in foreign currency abroad each month, there are no such limits on ruble transfers. He emphasized the existence of these loopholes, stating, “There are still loopholes. Let’s say you decide to transfer money abroad, there are restrictions of $1 million per month, but for rubles, you can transfer as much as you want. What happens next? You transferred a billion rubles to Armenia, and can immediately exchange it for dollars. This possibility should be eliminated.” Kostin believes that these unrestricted ruble transfers adversely impact the exchange rate of the ruble.
To address this issue, Kostin proposed implementing a monthly transfer limit of 100 million rubles ($1 million). He emphasized that additional steps are necessary to support the Russian currency and expects the Bank of Russia to consider his proposal. However, he acknowledged that the introduction of such measures would depend on the ruble’s performance in the market.
The ruble’s recent decline against Western currencies prompted Kostin’s concern. After experiencing a sharp strengthening in the summer of 2022 due to high export revenues and strict controls on capital movement, the ruble began to slide, reaching its lowest rate since last year, dipping below 100 to the dollar in mid-August.
The Bank of Russia initially imposed restrictions on cross-border currency transfers in March 2022, setting the limit at $5,000. As the currency market stabilized, the regulator subsequently raised the limit to $1 million. The restrictions have been extended multiple times, most recently until September 30. The regulations prohibit Russian citizens and residents of ‘friendly’ countries from transferring more than $1 million to foreign bank accounts each month.
In conclusion, Kostin’s strong plea to close the loopholes allowing unregulated ruble transfers highlights the necessity of supporting the Russian currency. He proposes implementing a monthly transfer limit of 100 million rubles and anticipates the Bank of Russia’s consideration of this proposal. The recent decline in the ruble’s value emphasizes the urgency of taking action to stabilize the currency.