- The Russian central bank has dismissed rumors of freezing retail bank deposits.
- Freezing deposits would harm financial stability and undermine trust, the bank said.
- Last year, the central bank hiked rates to 21% in an attempt at cooling Russia’s wartime economy.
Russia’s central bank has taken to Telegram to publicly dismiss rumors that its citizens’ bank deposits may be frozen.
The idea that retail bank deposits could be frozen is “absurd” and “unthinkable,” the Central Bank of Russia wrote in a Telegram post on Monday.
“In addition to the fact that this is a gross violation of the right of citizens and companies to manage their assets, such a step will undermine the foundations of the banking system and the financial stability of the country,” the regulator wrote.
The concerns came after Elvira Nabiullina, Russia’s central bank governor, hiked rates to 21% late last year in a bid to cool soaring inflation — an economic pain point President Vladimir Putin has acknowledged.
The high interest rates attracted a flood of bank deposits. Recently, rumors emerged that retail deposits could be frozen, prompting Russians to swarm the central bank with questions, the bank wrote in its Telegram post.
“It is quite obvious that in any market economy, of which bank lending is an integral part, such a step is unthinkable,” the bank wrote in the post dismissing the rumors.
The rumors about frozen deposits are a reflection of the nervousness in Russia’s wartime economy.
This is not the first time Russia’s central bank has addressed concerns that Russians’ savings could be frozen and interest withheld.
In November, Nabiullina dismissed such concerns as “nonsense,” Russia’s RBC news outlet reported. She was responding to a question from the lower house of Russia’s parliament.
Russia has been under a slew of Western sanctions since it invaded Ukraine in February 2022. It has managed to avoid going bankrupt thanks in part to growth from its massive spending on military and defense activities. It has also managed to pivot to alternative export markets such as China and India.
However, the Russian central bank has warned that the economy is at risk of overheating.
Russia’s economy faces multiple issues like high inflation, a decline in the value of the ruble, and a severe manpower shortage.
In November, the country’s inflation rate hit nearly 9%. Prices of staples from butter to potatoes in the country have risen sharply, putting a strain on the finances of ordinary citizens.
As the war in Ukraine nears its fourth year, Russia’s economy could run out of cash before the end of this year, a Swedish economist wrote on Tuesday. This could hit its ability to continue financing the war and its economy.
