Translated material
Respect for the ruble
Vladimir Putin promises cheap loans
Prime Minister Vladimir Putin on Friday participated in the international conference “Central banks and the development of the world economy: new challenges and views into the future,” dedicated to the 150th anniversary of the Central Bank of Russia. The Chairman of the Cabinet of Ministers made a number of important statements, which, however, rather confirmed the policy he had chosen rather than giving it some new vector.“I am very pleased to be in such a representative audience, among people on whom so much depends in the global economy,” Mr. Putin addressed not only the head of the Russian Central Bank, Sergei Ignatiev, but also the head of the European Central Bank, Jean-Claude Trichet, and to the First Deputy Managing Director of the IMF, John Lipsky. “The financial and economic well-being in our country largely depends on your decisions. And we closely monitor your every move and gesture. We try to read everything, as Reagan once said, “from the lips” - even what you haven’t done yet, but are just planning,” the head of the Russian government flattered the distinguished guests. However, the guests, for their part, are probably also closely watching for Vladimir Putin.
The Prime Minister allowed himself a short excursion into history, recalling that the state bank was established in Russia in 1860: “Its creation became one of the first links in the chain of great reforms of the Russian Emperor Alexander II - reforms within which serfdom was abolished, reforms have been made in judicial institutions, military and zemstvo, that is, municipal reforms have been carried out... We in Russia will more than once turn to the unique experience of this era, which provided an example of successful and organic modernization of the main political and social institutions of our country.”
Recalling the need for trusting cooperation of all branches of financial and economic power in all countries, Vladimir Putin gave instructions specifically to Russian subjects of monetary regulation. The main achievement of the domestic Central Bank, the prime minister said, was the trust of the national currency on the part of the population: “A stable ruble, freely convertible into foreign currency, gives Russian citizens not only obvious material advantages, but also, if you like, to a certain extent instills a sense of self-respect.”
The head of government admitted that all the measures taken as part of the fight against the crisis (including the deposit insurance system, decriminalization of the banking sector, ensuring the stability of the banking system) worked in a timely and effective manner - “thanks to them, we managed to overcome the crisis phase relatively quickly and return again on the trajectory of economic growth."
After praising banks, Vladimir Putin called for “reducing excessive demands” on their work, and then reiterated the challenges facing bankers and financiers. “Of course, the current monetary policy should be structured in the interests of ensuring sustainable, healthy economic growth,” the prime minister recalled. The most important strategic task, according to the head of government, is a consistent reduction in inflation, to 5-7% over three years, and reaching a lower rate of growth in the future. “The economic feasibility of suppressing inflation is quite obvious, especially for this highly professional audience. And here I can’t add anything except that, by and large, the inflation rate is an indicator of the quality of work of the Central Bank of any country. Of course, we do not renounce our share of responsibility, and within the powers of the government we will help slow down price increases - for example, restrain the tariffs of the so-called infrastructure monopolies, create a competitive environment, and so on.” Thus, Vladimir Putin demonstrated that the Cabinet of Ministers shares responsibility for the fact that until now inflation has rarely deviated from 10% at the end of the year, and then only upward, which is too much even by the standards of the Russian economy (the exception was 2006 - - 9% and 2009 - 8.8%).
Ordinary citizens will certainly be interested in implementing the next goal set by the Prime Minister for the Central Bank and the banking sector as a whole - increasing the availability of bank credit for the real sector of the economy by lowering interest rates and increasing loan terms. Objectively, the situation is already favorable for lending growth, the refinancing rate is at a historical minimum - 7.75%, and annualized inflation has fallen to 6%.
In addition, Vladimir Putin recalled that, as part of increasing the availability of loans, it was decided to lower rates on subordinated loans already issued to a number of banks - from 8-9.5% to 6.5-7.5%. “We expect that the decisions taken today to reduce rates on subordinated loans will contribute to growth and expansion of the loan portfolio, which will be used by the real sector of the economy,” the prime minister said. Of course, both the real sector and ordinary consumers are counting on this.
The Central Bank, for its part, will have to do everything in its power to ensure that the increase in lending has a positive impact on macroeconomic indicators, and to ensure that the banking sector grows not only quantitatively, but also qualitatively. “The scale of banks’ activities and the quality of their work are still very far from the real needs of the Russian economy. It is no coincidence that many domestic borrowers, both in pre-crisis times and today, often turn to the services of foreign lenders, although the potential danger of excessive involvement in external debt is known. But we should look for resources to increase the capitalization of domestic banks - and we are not talking about government funds, but about the growth of banks’ own income and investments of their owners,” explained Vladimir Putin, thereby making it clear that state support for the banking sector itself has actually ended with the end of the acute phase of the crisis.