Interview by Andrey Petrov, exclusively for Vestnik Kavkaza
Ksenia Yudayeva, the first deputy chairwoman of the Central Bank of Russia, said that stability of the financial system in Russia was ascertained by stress tests of the Central Bank and the reality. In June, the Bank of Russia will present an updated macro forecast for the next three years. The report may undergo changes, compared to its older version presented in March. The financial regulator does not rule out changes in the volume of regular interventions and it is currently analyzing sufficiency of the reserves.
Mikhail Belyayev, the chief economist of the Institute of Stock Market and Management (ISMM), has given his insight into the prospects of the Russian financial system in an interview with Vestnik Kavkaza.
- Ksenia Yudayeva believes that the financial system has passed the stability test. Do you agree with such opinion?
- The financial system will pass the stability exam only whem everything is in order in the economy. If we are adamant that everything in the economy is in order, we do not need to talk about stability of the financial, the banking system. There are two opinions about the economy. One draws attention to formal indicators, formal indicators, as we know from April, are not very good. Industrial production dropped by 4.5%. [Minister for Economic Development Alexey] Ulyukayev and [Sberbank head German] Gref pointed that out.
But if we look deeper and ignore the formal indicators, we will see that the our economy has become a better semblance of a real economy following real economic laws in the harsh context of the sanctions, though some indicators were 'drawn in'. Nevertheless, we see success on separate lines, very important ones, the agricultural sector, the military industry. And they outshine the formal common economic, global indicators, in my opinion.
So, we can agree with our authorities of the economic sector that the acute phase of the crisis has been passed. But we must understand that it is very fragile balance, and that all the following welfare and progressive development of our economy will depend on the rationalized and carefully balanced economic policy of our government.
- What weak and strong spots of the Russian financial system are showing themselves at the moment?
- The financial system has been quite passive. The strong spots include the fact that the banking system has become more careful with crediting consumers. It used to have quite an aggressive policy. Consumer crediting was regarded as a solution for depositing assets. Loans were granted on quite easy conditions with account of their payment. But now, when it has become clear that people are in a complicated situation, the labour market has become mroe harsh, people suffered losses in salaries, many were fired, and, most importantly, inflation has affected their purchasing power, their potential to take loans with interest rates has droppedm banks have become more cautious. They pursue a more moderate policy, they have succeeded in adapting in this aspect.
Other than that, we cannot say that banks were especially wise or were flexibly manoeuvring on the market. Besides, large banks have simply asked and received backup for their capital via state mechanisms of support. It is not an achievement of banks, it is an achievement of the government, state regulation that understands that it cannot allow the banking system to collapse, that it would affect the prosperity of the whole country.
- What new mechanisms for protection of the financial system have been developed since the start of the crisis?
- I have not seen any new mechanisms besides the same banal steps in the stream of the Basel Agreements and recommendations of the Basel Committee, which manages sustainability of the banking system, in other words, strengthening the capital base of the banks, boosting capitals of banks. We have seen that up to a trillion rubles were proposed to inject into it, it is the most banal accounting approach.
The recommendations of our mega regulator that banks show more moderation, caution and vigilance in crediting the consumer sector of industrial enterprises are quite banal too. That is basically all.
It is very difficult to talk about some productive and purposeful work of banks in the context of the key rate 'swaddled' most of active operations from head to toe.
- What mechanisms for protection of the financial system do you think should be developed?
- All the mechanisms related to banking activities and their success are associated with the management models. The ability to adapt to the changing realities depends on their management. The regulator needs to forecast how and in what direction the mechanisms need to move. Pure cash assistance can help banks put documents and accountability in order in a purely financial and accountable aspect, but they restrain real revamp of the banks' activities.
If, let's say, a bank gets into unpleasant situation dictated for external economic conditions, it needs to revamp its activities to improve efficiency again. Instead, it receives additional money, puts financial documents in order and it loses all incentives to revamp its activities.
Thusly, such activities encourage long-term conservation of the current situation and may do more harm than good to the bank.
We see that the Central Bank does not cease recalling licenses. It means that the banking community is not in the order the mega regulator wants it appear. In this case, we can scold the mega regulator as a surveillance organ and as an organ actually watching the banks' health. If it has to recall bank licenses en masse and regularly, it means that the mega regulator is erring somewhere in this direction.
