Second, even if we could implement these measures, they would not result in sustainable growth, because it is potential growth rates that are currently low – about 1.5–2%, according to our estimates – following structural restrictions. Third, many structural reforms directly impact the way we will move to our inflation target. For example, with better competition or tighter regulation of natural monopolies’ tariffs, we may avoid triggering inflationary pressure while cutting rates more dramatically. Monetary and fiscal policy may ensure macroeconomic stability, but it is insufficient for sustainable economic growth. The most important structural reform is improvement of business climate, primarily measures to promote competition, deregulate the economy, reduce the share of state-owned and state-controlled companies, and protect property rights and minority shareholders. The quality of business climate is the reason for insufficiently developed equity financing and capital market in our country. Let me remind you that by debt burden Russia is in the upper range in the list of peer countries, but lags considerably behind them in terms of capitalisation. If corporate governance and protection of minority shareholders’ interests are challenged, shares of such companies will be hardly sold. The fact that our companies earn profits but abstain from investing them in their own business comes from macroeconomic uncertainty, including tax regime, while investments in other businesses, including through financial mediators, are constrained by high risks arising not only from the vague prospects of these business projects, but also poor protection of such interests.

New technologies add elevated threats of cyber-frauds and cyberattacks to traditional banking risks. These are global challenges. Meanwhile, the Russian banking system also faces specific challenges, namely: –  slack economic dynamics which shrinks banks’ earning capacity;  –  high debt burden of traditional borrowers;  –  persistently restricted access to external financial markets;  BIS central bankers’ speeches  5  –  weak players (some players faced difficulties following the worsened economic environment adding to the problems accumulated in the financial sector and not yet solved. The Bank of Russia has to stick to active supervision to check these problems);  –  another challenge is priority funding of financial institution owners’ businesses rather than competitive projects;  –  unavailability of long money in the economy due to underdeveloped collective savings (pension funds, unit investment funds, life insurance). The challenges I have mentioned affect not only banking, but the whole financial system and require different approaches in regulation and supervision. We shall restore a healthy financial market, clear from weak and unscrupulous financial institutions. This is an ongoing process, but it still takes time to be completed. I would say that the Russian banking sector’s higher resistance to serious external shocks is among our most important achievements in bank regulation and supervision. The banking system is stable, has a good capital stock and does not need regular easing to function efficiently. Stress tests held by the Bank of Russia and major credit institutions confirm that.