The Central Bank of Russia announced new measures to support the country's financial market.
Against the backdrop of the weakening of the ruble and falling stock indices, the Central Bank plans to carry out foreign exchange interventions and provide additional liquidity to banks.
The regulator also expanded the pawnshop list.
We are talking about a list of government securities that the Central Bank accepts as collateral when granting a loan.
“The Bank of Russia will ensure the maintenance of financial stability and the continuity of the operations of financial organizations by using all the necessary tools.
The Bank of Russia, financial institutions have clear action plans for any scenario," the Central Bank said in a statement.
The regulator also ordered brokers to suspend short selling on the exchange and over-the-counter markets.
As explained in the Central Bank, the initiative should protect the rights and legitimate interests of investors in the current situation.
The opening of trading on the Moscow Exchange on Thursday, February 24, was marked by a sharp depreciation of the Russian currency and the country's securities.
During the morning session, the dollar rose immediately by 3.6% - to 84.08 rubles, and the euro - by 3.9%, to 95.24 rubles.
At the same time, the Moscow Exchange Index fell by 11.7% to 2735 points.
Due to the large-scale collapse of Russian assets, the Moscow Exchange has temporarily suspended trading on all markets.
A few hours later, it was decided to resume the trading session, however, the rapid fall of the ruble and stock quotes continued.
Thus, the dollar exchange rate at the moment rose by 10.4% and for the first time in the entire observation period reached 89.6 rubles.
The euro, in turn, grew by 9% - up to 99.99 rubles.
The value was the highest since December 2014.
After the resumption of trading, the Moscow Exchange Index fell by 45.5% to 1682 points, and the RTS index fell by 50.2% to 610 points.
The last time similar values could be observed back in January 2016.
Against this background, the Moscow Exchange launched a discrete auction mode on the stock market.
Such a mechanism is traditionally used as an alternative to suspending trading in the event of strong fluctuations in the Moscow Exchange index over a short period of time.
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© Grigory Sysoev
As experts interviewed by RT explain, the market reacted negatively to the aggravation of the situation around Ukraine.
On the morning of Thursday, February 24, Vladimir Putin announced a special military operation to protect Donbass.
According to the Russian leader, this decision was made after the request of the DPR and LPR for help.
At the same time, the head of state stressed that the Russian Federation has no plans to occupy the territory of Ukraine.
“The goal is to protect people who have been subjected to abuse, genocide by the Kiev regime for eight years, and for this we will strive to demilitarize and denazify Ukraine, as well as bring to justice those who committed numerous bloody crimes against civilians, including and citizens of the Russian Federation,” Putin said in a televised address.
The outbreak of hostilities provoked panic among investors, as a result of which market players began to massively withdraw money from Russian assets.
Alexander Razuvaev, a member of the Supervisory Board of the Guild of Financial Analysts and Risk Managers, spoke about this in an interview with RT.
“In the current political situation, serious stock fluctuations are possible, which are often based precisely on the panic of investors.
However, citizens and market participants should not freak out and run to exchangers.
Better to follow the news.
In my opinion, the conflict may leave the acute phase as early as the weekend, and on Monday or at the latest in the middle of next week, the situation on the markets will stabilize in our country,” Razuvaev said.
According to him, market participants fear the introduction of new anti-Russian sanctions.
So, over the past few days after Russia recognized the independence of the DPR and LPR, the EU countries, the USA, Great Britain, Canada and Japan announced the first restrictions on Moscow.
In particular, sanctions were imposed against the sovereign debt of Russia, the state corporation VEB.RF, Promsvyazbank, as well as the majority of State Duma deputies.
In addition, Germany has suspended the certification of Nord Stream 2.
Earlier, US President Joe Biden threatened to deprive Russian banks of the ability to conduct transactions in dollars in the event of a Russian invasion of Ukraine.
At the same time, Kiev calls for disconnecting Moscow from the SWIFT international payment system.
Similar statements are made by the authorities of the Czech Republic.
“So far, the restrictions are moderate, since no one expected a tough response from Russia.
However, more serious sanctions are already being discussed.
To some extent, there is a possibility that Russia will be disconnected from SWIFT, but it is objectively difficult to predict such a decision.
Most likely, the West will pursue a policy of targeted sanctions.
But I don’t think that the restrictions will be completely fatal,” Razuvaev added.
A similar point of view in an interview with RT was expressed by the analyst of Alfa Capital Management Company Alexander Dzhioev.
According to him, disconnecting Russia from SWIFT or dollar transactions is a last resort and could negatively affect Europe itself, since Moscow is the largest exporter of energy resources to the region.
Against the backdrop of Thursday's events, the cost of gas in Europe rose by more than 40% and for the first time in two months reached €125 per MWh, or about $1,442 per 1,000 cubic meters.
At the same time, the price of a barrel of Brent oil on the ICE exchange in London grew by 8.5% and exceeded $105.
Previously, a similar indicator could be observed in August 2014.
Market control
After the measures announced by the Central Bank, the situation on the Russian financial market somewhat stabilized.
So, in the middle of the day, the dollar and euro rates fell to 83.2 and 93 rubles, while the Moscow Exchange and RTS indices recovered to the levels of 2187 and 817 points.
The official exchange rates of the Central Bank on February 25 were set at 86.93 rubles per dollar and 97.77 rubles per euro.
“Interventions in the foreign exchange market are designed to keep the ruble from falling below certain levels.
Today, the dollar exchange rate has almost reached the level of 90 rubles, but has not yet been able to overcome it.
Most likely, it was at this level that the Central Bank began to sell foreign currency, thereby increasing the demand for rubles, ”explained Alexander Dzhioev.
At the same time, providing liquidity to the banking sector allows credit institutions to conduct currency conversion operations, as well as fulfill their obligations to depositors, the expert added.
According to him, the actions of the Central Bank allow minimizing risks, but the situation on the market remains uncertain.
“So far, it is difficult to predict the possible dynamics of the ruble, since the market is dominated by a chaotic demand for currency from individuals.
The Central Bank's interventions will remain a deterrent for the fall of the ruble.
The volume of accumulated gold and foreign exchange reserves is at record levels, so the regulator has a margin of safety for holding the exchange rate for a sufficiently long time, ”said Dzhioev.
However, experts do not exclude the possibility of introducing additional measures if necessary.
According to Alexander Razuvaev, the authorities can resort to actions that were most effective during the 2008 crisis.
“Then, for example, VEB.RF was actively buying shares of Russian companies on the stock exchange in order to support quotes.
Now this would be a good measure, since we have 17 million private investors on the market.
I think that if the dollar exchange rate approaches 90 rubles again, then the Central Bank will begin even more active steps to stabilize the exchange rate, ”concluded Razuvaev.