For most of the year, we have worked on elaborating the details of this approach. What is more, Mr Aksakov has already announced that the Duma has adopted the necessary changes to the legislation in the current session, and within a year and a half the banks will be able to choose the type of license they will work under, and subsequently, what regulation will be applied to them. We expect that banks with a basic license will mostly work with small businesses and household finances. Moreover, we are now working on and support the idea of ? ?introducing small business insurance in banks to bolster entrepreneurs’ confidence in small banks. Third. Encouraging competition. This involves developing the capital market, which can offer alternative or complementary products to bank lending. With the development of equity financing and the bond market, private investors will enjoy a wider range of financial investment instruments. Thus, product competition will benefit both real sector enterprises as well as various investors. I would now like to address the objectives that we set for ourselves in the banking sector. We are seeing positive trends in the banking sector. In June, both assets and lending to the economy continued to grow, consumer loans increased significantly, and mortgage lending saw rapid growth. Household deposits also rose. Typically, the share of household deposits in bank liabilities exceeded that of corporate funding.
As our experience has shown, during times of high volatility it is crucial to avoid rash responses to shocks (shocks being any big changes, both positive and negative). This policy suggests that rushed decisions should be avoided. For example, if at the beginning of the year we had lowered the rate at a faster pace, as many wanted us to, we might very well have faced the need to sharply increase it again shortly thereafter. However, there are clearly also shocks such as those in 2014 that require a more decisive response. However, it is important to contend with both the consequences of shocks on inflation as well as the reasons behind them. These reasons are often beyond the Central Bank’s control but this does not mean it is impossible to hit upon suitable state policy measures on the whole. This primarily concerns the dynamics of food inflation and regulated prices and rates. The state policy of developing infrastructure, logistics, market competition (primarily food markets), and the regulation of natural monopolies’ rates can go a long way to reduce price volatility and thus lead to a faster reduction in inflation expectations. This, in turn, will allow the Central Bank to draw the key rate closer to the equilibrium-neutral level faster (I would like to reiterate that, in our estimation, it stands at 2.5-3% in real terms or 6.5-7% in nominal terms).