Another important risk is that deposit and credit rates are adjusting to the changes in the key rate more slowly than we expect, that is, the transmission of our decisions to monetary conditions takes more time. As to supply-side risks, logistics problems and bottlenecks in production chains remain a significant risk as these issues may persist longer than we estimate today. The abovementioned problem of a limited availability of labour resources is another risk, which is becoming increasingly important. Moreover, this problem may become even more serious. This is equally relevant for both the Russian labour market and the constraints experienced by other economies. A decline in global demand due to a slowdown in the world economy may become a disinflationary risk. This may happen, for instance, in the case of a large-scale new wave of the pandemic, accompanied by extensive lockdowns in the majority of countries. Another scenario where inflationary pressure might also weaken faster in the Russian economy is a quick easing of the restrictions on foreign travel for both outbound tourism and the inflow of labour migrants. There is a number of factors, the potential impact of which is uncertain today. In the first place, these are the volumes and quality of the grain and vegetable harvest this year both in Russia and worldwide. Moreover, it is still uncertain how steady global inflation is and how fast and extensively other central banks will respond to it. Winding up, I would like to comment on our future actions.
Let me now turn to seven more awkward questions for us. First, how do we square the principle of proportionality with the steeper slope of regulatory requirements this inevitably causes for growing firms? This arises in many ways, where we take a softer approach for smaller firms but this has to be withdrawn as they grow. One example is the steps in our Systemic Risk Buffer regime, which we’ve debated with Sir John in the past – it’s true these could be smoothed to some extent by greater granularity and/or an ‘income tax’ approach, but the basic problem of gradient remains. This issue also arises on the resolution side, which is of course outside the scope of the competition objective – it must be right that we exempt small firms from bail-in debt, but this inevitably leads to a moment when successful firms stop being small and need to start issuing. Second, and related to the first, although we have in my view been pretty successful in encouraging new entrants, it is so far notable that no small bank has successfully become a large bank. Perhaps this will change through time, and it may have much more to do with behavioural stickiness of current accounts than regulation, but it would be complacent to be relaxed about it. As an aside, there may be lessons to be learned here from the general insurance market: it is notable that some of today’s largest GI firms started as small challengers within the last 20-30 years.