Russian financial system stabilizes

 Russian financial system stabilizes

Russia's financial system is much more stable than 10 years ago, Russian Central Bank Governor Elvira Nabiullina told a banking congress in St Petersburg.

At the same time she noted that some government measures may lead to short-term spikes in inflation, but added the moves were necessary and would not speed up inflation in the longer term.

"Inflation will return back to 4%," Nabiullina said.

According to her, the government should consider drawing up legislation to freeze the assets of banks being bailed out by the state and those of their owners.

She also repeated that the central bank was moving towards a neutral key interest rate, which it sees as closer to the upper end of a 6-7% range.

"Neutralisation of monetary policy - which we will reach soon - means a slowdown and, at the end of the process, a halt to cuts in the key rate. Still, situations when rates could be raised are possible if inflationary risks appear," Reuters cited the governor as saying.

Professor of the RANEPA faculty of Finance, Money Circulation and Credit, Yuri Yudenkov, speaking with Vestnik Kavkaza, noted that this stabilization was given to Russia at a very high price. "If we sum up what Elvira Nabiullina achieved since October 2013, then this is the devaluation of the ruble, low inflation due to the death of consumption, the destroyed peripheral banking system and 75% of the state-owned assets of the banking system. Now, with the slowdown of industrial lending, with a low inflation, the financial system actually turns out to be stable. But a stable financial system outside the developing economy is a weak consolation. Locally, Nabiullina succeeded in creating a stable subdivision in the Russian economy with good gold and foreign currency reserves and a positive balance of payments, but it does not do any good," he pointed out.

"In the future, if the country's investment climate changes and some trends towards an increase in investment and overall economic growth appear, the stability of the current banking system may be in doubt. But in the absence of active government actions, in Russia's modern depressive economy, our banking system may continue indefinitely," Yury Yudenkov added.

The Associate Professor of the department of corporate finance, investment planning and evaluation of M.A. Limitovsky at RANEPA, Alexander Arshavsky, pointed to the Russian Central Bank's effective work, which helps stabilize the Russian financial system. "If there are no strong external influences, then the domestic financial system is really stable and the Central Bank can stop sharp deviations from it. The Central Bank's policy is aimed at maintaining stability, and it is very effective now," he said.

"Stability does not imply a very rapid economic growth. The financial stability is aimed at calming the financial markets and making them working efficiently for a long perspective. When there is confidence that no crises are foreseen, the Central Bank will modify its policy to improve economic growth. For now, the regulator has been engaged in providing relative calm in the financial market to create the prerequisites for future economic growth," Alexander Arshavsky concluded.


Vestnik Kavkaza

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