ANNUAL REPORT 2018 MOSCOW Bank of Russia Annual Report for 2018 Approved by the Bank of Russia Board of Directors on 26 April 2019 Photo: I. Anisimov, A. Bogdanov, A. Ivasenko, E. Molchanov, M. Nazemtsev Published by Business News Agency PRIME 12 Neglinnaya Street, Moscow 107016 Official website of the Bank of Russia: www.cbr.ru Printed by ‘Tipografiya ‘Vozrojdenie’ © The Central Bank of the Russian Federation, 2019 Number of copies — 350. Order No. 355 Bank of Russia Annual Report 2 for 2018 Contents OPENING REMARKS BY THE GOVERNOR OF THE BANK OF RUSSIA 9 SUMMARY 11 THE STATE OF THE ECONOMY 1 OF THE RUSSIAN FEDERATION 19 1.1. The macroeconomic situation......................................................................................................... 23 1.1.1. External economic conditions .............................................................................................. 23 1.1.2. Inflation and economic activity ........................................................................................... 27 1.1.3. Fiscal policy, government finance and domestic government debt .............................. 32 1.1.4. Balance of payments, international investment position, and external debt ............... 35 1.2. The financial sector ..........................................................................................................................41 1.2.1. Monetary aggregates and financial and commodity market conditions ........................41 1.2.2. Financial market participants ..............................................................................................48 1.2.2.1. Financial institutions ..............................................................................................48 1.2.2.2. Financial market infrastructures and other participants ..................................58 1.2.2.3. Competition in the financial market .................................................................... 63 THE BANK OF RUSSIA’S 2 ACTIVITIES 65 2.1. Ensuring price stability ....................................................................................................................69 2.1.1. Monetary policy objectives and key measures ..................................................................69 2.1.2. Monetary policy instruments .............................................................................................. 72 2.2. Ensuring financial market resilience ..............................................................................................77 2.2.1. Ensuring financial stability ....................................................................................................77 2.2.1.1. Monitoring of financial stability risks ....................................................................77 2.2.1.2. Macroprudential regulation measures to ensure financial stability ................. 83 2.2.2. Managing assets in foreign currencies and precious metals .........................................85 2.2.3. Access to the financial market ...........................................................................................90 2.2.3.1. Credit institutions ..................................................................................................90 2.2.3.2. Non-governmental pension funds ...................................................................... 92 2.2.3.3. Insurance entities .................................................................................................. 93 2.2.3.4. Microfinance market entities ...............................................................................94 2.2.3.5. Other participants .................................................................................................95 2.2.3.6. National payment system participants ..............................................................96 2.2.3.7. Financial instruments ............................................................................................ 97 2.2.4. Regulation and supervision .............................................................................................. 100 2.2.4.1. Credit institutions, banking groups, and bank holding companies ............... 100 Bank of Russia Annual Report for 2018 3 2.2.4.2. Non-governmental pension funds .................................................................... 109 2.2.4.3. Insurance entities .................................................................................................. 111 2.2.4.4. Microfinance market entities .............................................................................. 114 2.2.4.5. Other participants ................................................................................................ 116 2.2.4.6. National payment system participants .............................................................126 2.2.5. Financial rehabilitation of financial institutions .............................................................. 127 2.2.6. Termination of financial institutions .................................................................................132 2.2.7. Countering malpractice in the financial market ..............................................................135 2.2.8. Foreign exchange regulation and foreign exchange control ....................................... 140 2.2.9. Countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism ..........................................................................................142 2.2.10. Improving financial and commodity market instruments and infrastructure ............145 2.2.11. Improving the accounting and the accounting (financial) statements of financial institutions .................................................................................................... 148 2.3. Expanding financial inclusion for households and businesses ................................................150 2.3.1. Financial consumer and investor protection ...................................................................150 2.3.2. Increasing financial literacy ................................................................................................158 2.3.3. Expanding financial inclusion ........................................................................................... 160 2.3.4. Improving corporate relations .......................................................................................... 166 2.3.5. Development of the bond market ................................................................................... 168 2.4. Development of the national payment system ........................................................................ 169 2.4.1. Cash circulation management .......................................................................................... 169 2.4.2. Development of national payment instruments ..............................................................171 2.4.3. Development of the Bank of Russia payment system .................................................. 172 2.4.4. Development of other payment systems ........................................................................173 2.5. Technology development and innovation support in the financial market ...........................174 2.5.1. Development of financial technologies ............................................................................174 2.5.2. Development of electronic interaction mechanisms ..................................................... 177 2.5.3. Ensuring information security and enhancing cyber resilience ...................................178 2.6. Other activities ............................................................................................................................... 181 2.6.1. Information policy ................................................................................................................ 181 2.6.2. Economic research ............................................................................................................ 184 2.6.3. Statistical activities ........................................................................................................... 188 2.6.4. International cooperation ................................................................................................. 190 2.6.5. Bank of Russia stakeholdings in russian economic entities ....................................... 196 2.6.6. Bank of Russia stakeholdings in credit institutions undergoing financial rehabilitation ....................................................................................................... 198 2.6.7. Bank of Russia stakeholdings in international organisations ...................................... 199 2.6.8. Improving legislation .........................................................................................................200 2.6.9. Addressing administrative and legal issues ...................................................................204 2.6.10. Addressing judicial issues ................................................................................................205 2.6.11. Data management in the Bank of Russia .....................................................................206 Bank of Russia Annual Report 4 for 2018 ORGANISATIONAL DEVELOPMENT 3 OF THE BANK OF RUSSIA 209 3.1. Personnel development ..................................................................................................................211 3.2. Process management