Central Bank Shifts Crises
Russian Central Bank deputy chairman Alexey Ulyukaev, speaking at an annual meeting with bankers in a Moscow suburb yesterday, acknowledged for the first time that there is a substantial crisis of liquidity in the Russian banking system. He stated that the Central Bank will shift its priorities away from inflation control to concentrate more on stability in the Russian banking system. This is in response to the continuing problems stemming from the U.S. mortgage crisis.
The Central Bank is this acting in harmony with Western regulators – European central banks and the U.S. Federal Reserve Board – even though it runs counter to government anti-inflation plans. This is indicative that the Central Bank expects the situation to worsen, observers say.
Ulyukaev's radical statement is taken as an attempt to reassure bankers of the regulator's support, especially for small banks, thus making the situation more predictable on the market. Otherwise, the banks may have started to raise interest rates in order to create a reserve of liquidity. Experts say that the refinancing measures instituted by the Central Bank last autumn were insufficient. Moreover, the Central Bank will be unable to raise liquidity through currency purchases as Russia's trade balance turns negative.
Bankers also note that, since Ulyukaev's statements were made in a closed meeting, and the Central Bank's monetary and credit policy for 2008 was written before the beginning of the liquidity crisis, without mention of changes in priority, it is unclear what specific moves the Bank will make, if any.
www.kommersant.com
All the Article in Russian as of Feb. 01, 2008
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