A joint International Monetary Fund (IMF) and World Bank (WB) mission visited Moscow on March 15-30 to conduct an assessment of the Russian financial sector. Its representatives met with the head of the Russian Central Bank, Elvira Nabiullina, other senior central bank and government officials, as well as financial sector representatives.
The IMF and WB experts came to the conclusion that the Russian authorities have managed to keep the country’s banking system stable amid challenging conditions.
"Against the background of a challenging macroeconomic environment, the banking system has been kept stable by the authorities’ decisive policy response, which included liquidity provision, capital support and temporary regulatory forbearance," the IMF's press service cited the statement of the leaders of the joint mission, Karl Habermeier and Aurora Ferrari, as saying. "Our group has discussed with the government's actions to strengthen the banking system and increase its resilience to risk," the document says.
"With the transformation of the CBR into a mega regulator, supervision of the financial sector has been enhanced," IMF and WB experts said, adding that their group "conducted assessments of the adherence to international standards in the areas of banking supervision, securities markets, and insurance."
The statement also gave a number of recommendations.
"Over the medium and longer terms, the diversification and deepening of the financial sector are priorities to support strong and sustainable economic growth," the experts note.
"Currently, financial intermediation provides a relatively low contribution to growth. Comprehensive measures need to be taken to raise financial inclusion and the efficiency of the highly concentrated and mostly state-owned banking system," TASS cited the statement of the IMF and the World Bank as saying.
The head of the Regional Banking Association and chairman of the Duma Committee on Economic Policy, Innovation and Entrepreneurship Development, Anatoly Aksakov, said in an interview with a correspondent of Vestnik Kavkaza that "this is regular analytical work." "The system is stable and calculations, payments are worked out, customers are served, deposits are growing quite rapidly. One can say that things are not as bad as they are talking about it from the outside," he said.
The expert acknowledged that "the number of revocations of bank licenses is large." "But I think that this year everything will be fine," Aksakov expressed hope.
According to him, now "the main problem of the Central Bank and other banks is the issue of trust." The regulator is rather suspicious of a certain part of credit institutions, fearing that they carry out a risky policy or questionable transactions. A small number of banks operate questionable transactions now, but there are questions in terms of violation of standards. Therefore, they revoke licenses. And, in my opinion, sometimes they don't know where to draw the line," the expert explained .
"We need to regain the trust and cooperation of the situation. I believe that banks should help the Central Bank to adjust its role, giving information, telling about schemes used by some customers of banks. On the other hand, the regulator should be a mentor and partner, not a surgeon with an axe. That's the task. In principle, it is being solved now," Anatoly Aksakov concluded.
The chief economist at PF Capital, Yevgeny Nadorshin, noted that the Russian financial authorities "were able to calm the situation in the banking system and it does not move into the category of acute problems." "But in general we cannot say that the banking system was stabilized. Negative processes are quite smooth and quite predictable in many cases. The Central Bank has managed to avoid a spontaneous, unpredictable development of negative processes. This is certainly an achievement. But it's not a stabilization," he said.
"On the other hand, it would be impossible to expect a different conclusion from the foreign experts, because, unfortunately, they don't have access to the real information and it is easy to guess what information they received from the representatives of the Central Bank. The fact is that the Central Bank states that there is no crisis in the Russian banking system, despite the fact that they revoke licenses almost every week. I think that it's a clear sign that there is no stabilization. We have a fairly predictable deterioration of the situation, that's all. It is the merit of the Central bank that there is no shock as there was in 1998 or 2008-2009," the expert added.
According to Nadorshin, "the Central Bank is now trying to pursue a policy of inflation targeting in the monetary sphere." "This is compounded by a dysfunctional banking system, because, in the first place, the channel through which a signal is transmitted from the Central Bank to the rest of the economy is the banks. Now many banks are incapacitated, they are simply trying to survive. This complicates the inflation targeting strategy," he said.
"I think that it is rather a systemic problem, because there is no reason to believe that there are banks in the system which do not have problems with reporting. Without cleaning the banking system, the monetary control policy will not work. The situation may happen when, like in Japan, the lack of readiness to accept a large amount of revalued assets will lead to the fact that the banking sector may not be able to support economic growth. It's a problem of the economy as a whole. Therefore, the readiness of the Central bank to solve the problems in the banking sector is very important now," Yevgeny Nadorshin summarized.
