Stable Banking System Characterized by Sustainability and Positive Dynamics

The banking system of Belarus is characterized by sustainability, positive dynamics and a healthy conservatism. There are 24 banks in the country, with total assets amounting to 63.5 billion Belarusian rubles, equivalent to US$32.8 billion (more than 65% of the GDP). Holding 65% of the total assets, the banks with state capital are the basis of the Belarusian banking system. Furthermore, there are 19 banks with foreign capital, which have a 32% share. The National Bank, as a regulator of the Belarusian banking system, focuses on securing the proper functioning of the system and its supervision in accordance with best international practices. Sergei Kalechits, Deputy Chairman of the Board, discusses the National Bank’s priorities and achievements.

European Times: What are some of the National Bank’s latest achievements?

Sergei Kalechits, Deputy Chairman of the Board of the National Bank
Sergei Kalechits, Deputy Chairman of the Board of the National Bank

Sergei Kalechits: In the sphere of the monetary policy, the most important achievements include ensuring monetary stability and improving the macroeconomic balance, which in turn create a stable basis for strengthening the national currency. For the past three years we have managed to limit inflation, and we are expecting record low inflation in 2017, which is, mainly, due to the transfer to a monetary targeting regime in 2015. Currently, we are focused on switching to inflation targeting in the medium-term perspective, and the midterm goal is to reduce inflation to 5% until 2020. In addition to switching to a monetary targeting regime in 2015, we also integrated a flexible exchange rate known as the ‘managed floating’, which enabled us to react rapidly to the external negative shocks on the economy, thus decreasing the macroeconomic imbalance and the risk of its emergence. Moreover, the stabilization of the domestic foreign exchange market and the consistent deceleration of inflation allowed for liberalization of the foreign exchange regulations and dedollarization of the economy.

Another important achievement is ensuring financial stability in the country, particularly,a stable functioning of the banking sector, taking into account its dominant share in the financial market. Even under the difficult conditions in the economy, we have managed to maintain a high level of banking capitalization, which is sufficient not only to cover the risks, but also to counteract a variety of challenges. This was confirmed by an independent assets quality review, conducted last year.

Furthermore, the National Bank is focusing on the development of the financial market. In March 2017, we adopted the ‘Strategy for Development of the Financial Market of the Republic of Belarus until 2020’, a complex document covering all sectors and focusing on forming competitive, capacious, effective and trustworthy financial market, which will serve as a stable basis for the country’s long-term growth.

European Times: What are the major developments in the sector?

Sergei Kalechits: Belarus has achieved significant progress in terms of banking supervision, according to the assessment of the financial sector conducted by the IMF and the World Bank. Among the most important banking supervision activities is the implementation of the Basel III norms, which have been partially implemented since 2016 and will be fully implemented as mandatory in 2018.

We are building a well-balanced, effective, advanced and attractive financial market. Our “road map” is the ‘Strategy for Development of the Financial Market of the Republic of Belarus until 2020’, which underlines three main directions: rapid development of non-banking segments of the financial market aimed at achieving a more balanced market structure; strengthening the institutional environment in the banking sector, which includes changing the mechanisms of state support, extending market crediting, introducing competition, developing the systems for assessment and control of fiscal risks, etc;and active integration of digital banking technologies for the purpose of improving the effectiveness of financial institutions’ activities.

One of the key factors of our success is the high level of coordination between the National Bank and the Government. We are currently working on dedollarization and, at the same time, on liberalisation of the foreign exchange market. A new law on foreign exchange regulation and control is being prepared and will be implemented in 2020. Furthermore, we are planning a range of significant changes in the sphere of foreign exchange market regulation and are actively working on determining the legal status of virtual money and crypto currencies. We are also seeking foreign strategic investments for the two state-owned banks – “Belinvestbank” JSC and “Bank Moscow-Minsk” JSC.

European Times: Who are the key players on the financial market?

Sergei Kalechits: The banking sector is the main financial intermediary in the market, currently holding 64.5% share of the assets. Combined with the assets ofthe Development Bank, which was created with the aim to improve state financing programs and important social investment projects, and assets of the National Bank the share of the banking system’s assets is around 90%.Insurance companies hold 3.1% of the assets, whereas the leasing companies hold around 3.3%. Furthermore, there are relatively young and independent participants in the Belarusian financial market, such as microfinance organisations, forfeiting and forex companies.

In the past decade, the banking sector has witnessed an outstanding growth, while insurance, securities, and other non-banking financial organisations developed at a slower rate. In recent years, there has been a decrease in the share of banks’ assets due to increased number of participants in the Belarusian financial market, and the strategy for financial market development until 2020 focuses on improving the balance of financial market’s structure. The banking system will continue to perform the role of the main financial intermediate, but the accelerated development of the non-banking sector will reduce the banking sector’s dominance and contribute to the creation of additional financial instruments.

European Times: What is your personal message?

Sergei Kalechits: Belarus is a dynamically developing country in the centre of Europe with a stable social and political situation, absence of conflicts and high-quality labour force. It offers direct access to the EAEU markets and has excellent investment legislation, as well as low crime and corruption level. The presence of international institutions and the high ranking in the World Bank’s Doing Business report further strengthen the country’s position as an attractive investment destination. Moreover, Belarus is a country with beautiful nature and hospitable people, open for business, tourism and cultural enrichment. At present, any EU citizen interested in visiting Belarus or doing business therein may come and stay for a short visit of up to five days without visa.