Russia's new central banker in TV interview

From BBC Monitoring Former Soviet Union, 24 March.

The banks will in turn will be more confident of their resources and able to take a longer-term view of their ability to lend. Ignatyev said he wanted the Central Bank to have freedom of operation but not absolute independence. The following is an excerpt from the report on 24 March, including the text of Ignatyev's interview:

[Presenter] The job of chairman of the Central Bank is no longer vacant. First Deputy Finance Minister Sergey Ignatyev has been appointed Russia's top banker. There were no serious upheavals on the currency market as the Central Bank changed hands. Viktor Gerashchenko has bequeathed a large gold and foreign-currency reserve and a stable rouble rate of exchange. What kind of policy will the new chief of the bank pursue?...

What will the rouble rate be, how to protect bank deposits? We discussed this with Sergey Ignatyev immediately after he became the chairman of the Central Bank.

[Question] Mr Ignatyev, the main issue that interests people is what will happen to the rouble rate.

[Ignatyev] Nothing terrible [laughs]. When we were doing the calculations last year for the federal budget we assumed that the average rate for the year would be R31.5 to the dollar, with it being about R33 by the end of the year. We have no reason to amend that forecast.

[Question] What does the Central Bank intend to do to make Russian banks more dependable?

[Ignatyev] There are two measures here. Tighter supervision of the banks, which is one of the Central Bank's functions. In my opinion a very important one. The second is the creation and operation of a mechanism to guarantee people's deposits. A draft law is now being completed [on this] and I think it will be passed this year.

[Question] Guaranteeing people's deposits - can you explain what that means?

[Ignatyev] At the moment only money held in state banks is guaranteed by the state. That means Sberbank above all, and also Vneshtorgbank. The idea is that commercial and other banks that comply with tighter financial stability requirements will also receive a kind of guarantee that will lead to greater confidence in them.

[Question] That is, people can deposit their money in these banks without fear, knowing that the state will insure them if it comes to the worst?

[Ignatyev] Yes. But not 100 per cent, so people should still be careful when putting their money in banks.

[Question] In your speech to the Duma, you said that inflation needs to be slowed. In your opinion, what is an acceptable rate of inflation?

[Ignatyev] Last year, when the main planks of monetary policy were being worked on, and it's mostly the Central Bank that does that in the Russian Federation, the forecast was that inflation would be 12-14 per cent this year. We have no reason at the moment to adjust that forecast.

[Question] What can the Central Bank do if inflation goes above those figures?

[Ignatyev] The Central Bank's main lever, or way of influencing the situation, is to slow the growth of money supply. So the Bank has a good way of regulating the amount of money in circulation. But our currency reserves could also play a role. They're at a very high level at present.

[Question] How high?

[Ignatyev] The gold and currency reserves are about 37bn dollars at the moment.

[Question] Is the Central Bank planning to do anything to make loans more accessible to ordinary people?

[Ignatyev] Well, that depends on banks' resources. Meaning how much they can lend to the real economy, that is, industrial enterprises, agriculture and the public. Measures are being planned that will increase the resource base. Moreover, this resource base will become more solid. That is, the banks will have less fear of the inflow of deposits suddenly drying up. So they will be able to issue loans for longer periods and on more attractive terms.

[Question] You mean measures to guarantee deposits?

[Ignatyev] Measures to guarantee deposits, supervise the banks, and loads of others.

[Question] Mr Ignatyev, we know that the Central Bank is the main shareholder in Sberbank. With you in charge, is there going to be any change in the relationship between the Central Bank and Sberbank?

[Ignatyev] I think the Central Bank will continue to be the main shareholder in Sberbank for many years to come. That will give Sberbank a greater sense of security, because the Central Bank will support it if need be. But as regards supervision of Sberbank, I think that will be tightened in the near future.

[Question] As head of the Central Bank, will you aim to preserve the Bank's absolute independence or will you be backing the draft law now making its way through the Duma?

[Ignatyev] I don't think we will be aiming for absolute independence for the Central Bank. It should have independence as far as its operations are concerned, especially its implementation of monetary policy. As for the law on the Central Bank, there are at least two versions in existence. One was drafted by members of the Duma, the other by the government. I support the government's version.

[Question] Thank you for finding the time to talk to us.

[Ignatyev] Thank you.