Russia Mandates Yuan for Banks' Foreign Exchange Reserves

Russia’s central bank wants commercial banks to hold mandatory yuan reserves to prevent shortages of the Chinese currency in the foreign exchange market and to curb excessive lending. Yuan swap rates surged above 40% in March, driven by large yuan-denominated loans and reduced inflows of the currency due to weak oil prices hitting Russia’s export revenues earlier this year. “When clients withdraw their yuan, many banks seek yuan in the money market. This is a short-term market, and rates there have spiked,” said Central Bank Governor Elvira Nabiullina at a banking conference in Moscow, quoted on Wednesday (29/4/2026). The yuan has become the most traded foreign currency in Russia following Western sanctions on many Russian banks and the Moscow Stock Exchange, which restricted dollar and euro trading, pushing it to the over-the-counter market. “Banks may not be pleased, but we are considering introducing separate regulations on foreign currency liquidity because this is not the first time rates have spiked like this,” Nabiullina said. “We believe banks should learn from past experience that such volatility is unnecessary.” She said the central bank would first consult with commercial lenders on the proposal. Nabiullina spoke ahead of plans to resume foreign exchange operations for the fiscal reserves of the National Wealth Fund in May. With oil prices, Russia’s main export, now above the US$59 per barrel cap that determines whether revenues are saved or used to cover budget deficits, the country will buy yuan in May. Dmitry Pyanov, Deputy CEO of Russia’s second-largest bank VTB, said on Monday that such purchases risk destabilising the domestic foreign exchange market in the short term.