Central banker says Russian financial system stable already

MOSCOW, May 30 (PRIME) -- The Russian financial system is stable and can survive without any special regulatory incentives, the central bank’s Chairwoman Elvira Nabiullina said at the State Duma, the parliament’s lower house, on Monday.

“We saw that in 2015 the financial system adapted and we managed to gradually abolish all these regulatory holidays, concessions, and preferences by the end of the year. This shows that the financial system is quite stable, it can live without any regulatory concessions, without any special preferences,” she said.

The current account balance has fully adapted to new conditions, and the central bank does not see any pressure on the ruble, she said.

“Having introduced a floating rate, we have kept foreign exchange and gold reserves. The current account surplus has grown, a capital outflow has decreased, so we can say that the current account balance has fully adapted to new external conditions. On the part of account balance we do not see any pressure on the (ruble) rate now,” she said.

The central bank will keep a complete control in the monetary sphere even with an expected switch to a structural liquidity surplus.

“We expect quite a serious change in the monetary policy. We will switch from the situation of a structural deficit of liquidity to a structural surplus of liquidity,” Nabiullina said.

In conditions of a structural deficit the central bank provides liquidity to banks. Last year, the regulator provided up to 4 trillion rubles of loans to banks, she said.

“As the budget is currently spending reserve funds, in order to keep control over the rate, we will absorb this liquidity and our instruments will change. But I want to assure you that despite such change in the situation a control in the monetary policy will be kept. And we have all instruments to manage rates on the money market, in the monetary sphere of our economy,” she said.

The central bank does not try to reach the inflation target of 4% in 2017 at any cost, but this is an absolutely realistic figure, Nabiullina also said.

“We do not strive to reach the target of inflation of 4% at any cost, we as always, when we make a decision on the interest rate, estimate the situation in the economy, consider issues of financial stability. Our estimate shows that a sharp reduction of the interest rate will not now lead to a significant pace of economic growth, but can only provoke a new upsurge in inflation,” she said.

The banking system is capable of financing economic growth and banks’ capital is sufficient to boost lending, Nabiullina also said.

The central bank will continue its policy to bail out banks, but believes it is necessary to prevent problems at banks in advance, she said. The regulator will also tighten requirements to banks mandated to bail out other banks, she added.

(66.0413 rubles – U.S. $1)

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