OREANDA-NEWS. The Bank of Russia web-site features an analytical note Deposit Dollarisation and National Currency Depreciation in Russia and Kazakhstan prepared by the Bank of Russia Research and Forecasting Department.

The authors compare measures taken by regulators amid massive depreciation of national currency in 2014-2015 in Russia and Kazakhstan, two countries with virtually similar structures of national economies. From early 2015 through end-2015 Q3, given more serious weakening of the Russian ruble, the share of foreign currency deposits grew from 20% to 35%, compared with Kazakhstan where it plummeted from 37% to 65%.

The research studies several possible reasons underlying different dynamics of deposit dollarisation, considering primarily the transition to the floating exchange rate in Russia, while in Kazakhstan the national currency has been firmly pegged to the US dollar until quite recently. Besides, the authors note that in Russia during the high turbulence in the FX market interest rates for ruble deposits soared, whereas in Kazakhstan the tenge deposit rates remained low making these deposits totally unattractive, given high devaluation expectations.

Another reason could be an initially higher level of Kazakh economy's dollarisation, which exceeded the threshold, making it impossible to stop depositors' overflow from the tenge deposits to foreign currency deposits. Finally, higher deposit dollarisation in Kazakhstan could be driven by the behaviour of the banking sector. In Russia, banks sought to maintain the currency structure of their balance sheets, whereas Kazakh banks were ready to build up their FX assets.