Russian Central Bank considers capital sanctions for crisis times

Russian Central Bank considers capital sanctions for crisis times

Russia's Finance Ministry and the country's Central Bank plan to discuss a mechanism to introduce capital controls in the event of a severe crisis, the country's Deputy Finance Minister Vladimir Kolychev said.

He said the government wanted to discuss the precise criteria and conditions that would be needed to trigger such controls so that they could be brought in swiftly if necessary and so that investors knew exactly where they stood.

Kolychev noted said he did not want to disclose possible criteria for such controls yet, but said such controls would only be brought in the event of "really critical situations."

Russian Economic Development Minister Maxim Oreshkin, in turn, opposed the finance ministry's proposal. According to him, the proposed mechanisms will not be required in any situation, since Russia has recently pursued the right macroeconomic policy, having institutions that protect the stability of the financial market, so that no additional "tricks" are needed.

Chairman of the State Duma’s Financial Market Committee, Anatoly Aksakov, speaking with Vestnik Kavkaza, noted that Russia's financial system needs such a system of regulation during crisis situations, and he supports the idea of the Finance Ministry and the Central Bank. "I would not even call it a restriction - this is regulation of the foreign exchange market as additional powers of the Central Bank. It is necessary in order to use these powers in extreme cases. I have always supported this, including in 2014," the MP said.

The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, in turn, drew attention to the fact that by doing this, the Ministry of Finance suggests returning to the old methods of regulating currency transactions. "As far as I understand, according to budget plans, a lot of money will be allocated for various budgetary expenses in November-December - this does not mean that the exchange rate will seriously change, but the ministry nevertheless intends to develop a protective measure. They also want to legalize the mechanism that operated from December 15, 2014, when there was a crisis in the foreign exchange market," he explained.

"The events of December 2014 showed that when a currency crisis starts, exporters start to delay currency sales, since they have no serious obligations. Now the Ministry of Finance wants to approve the obligations, which we already had before 2006," Alexander Abramov said.

At the same time, he noted that he was wary of the lack of the Central Bank's response to the initiative of the Ministry of Finance. "The Central Bank's reaction is not known, because this is its area of ​​responsibility. It is possible that the initiative will be discussed and then put aside, since the introduction of crisis regulation will alarm everyone - it's no accident that Oreshkin reacted quite clearly to it," the professor at the department of the stock market and investments at the Higher School of Economics concluded.