VLADIMIR PUTIN
ARCHIVE OF THE OFFICIAL SITE
OF THE 2008-2012 PRIME MINISTER
OF THE RUSSIAN FEDERATION
VLADIMIR PUTIN
ARCHIVE OF THE OFFICIAL SITE
OF THE 2008-2012 PRIME MINISTER
OF THE RUSSIAN FEDERATION
VLADIMIR PUTIN
Transcript of the beginning of the meeting:
Vladimir Putin: Mr Ignatiev, the State Duma recently approved your re-appointment as Chairman of the Central Bank. How many times is this now? Your third?
Sergei Ignatiev: Yes, my third.
Vladimir Putin: That's no mean feat. But I am nonetheless very pleased because we have been working together for a long time. And indeed in that time the Central Bank's work has noticeably improved. It is in fact our economy's most important regulator. And relations between the Russian Government and the Central Bank have been very good and businesslike. We understand and support each other. That is very important, and in the conditions of the crisis in the global economy, all the more so. I expect that our future cooperation will continue in this tone.
But I cannot help availing of our meeting to ask for your opinion on the current situation and your views on the near future.
Sergei Ignatiev: Many thanks, Mr Putin, for your support. I hope that we will continue to work together as efficiently in the future, as we have done in the past.
As for my evaluation of the current situation, I would put it as follows: overall, the situation is stable although there are some difficulties, which I will speak about a little later. On a positive note, I would like to point to the fall in inflation. Over the last three months - by which I mean April, May and June - inflation has been half what it was in the same months last year. I think that this trend will continue and that and overall this year's inflation will be a great deal lower than the approximate figure of 13% announced at the beginning of this year.
I would also like to note that the situation on the foreign exchange markets has fully stabilised. The period February to May saw a tendency for the rouble to strengthen in relation to foreign currencies. The rouble will stay stable throughout June. We have hardly participated in this trading. In the first three days of June, we purchased about $1.6 billion, after which the rouble floated independently, without our engagement in trading. The rouble will remain stable, although its volatility elevated, just as we intended in comparison with its position, say, a year or so ago.
I am not expecting any surprises. External factors have been making a positive impact. First of all, the oil price is reasonable on all accounts, at approximately $68 a barrel. This is normal.
As to decreasing inflation, we are lowering our interest rates as promised, above all our refinancing rate. We have decided to do this three times, as we lowered interest rates from 13% to 11.5% in April. It is entirely possible that we will make another such decision, and that we will continue to lower it as inflation decreases.
I would also like to note that once again there is a good inflow from people depositing money in the banks, about 2% per month, excluding the influence of exchange rate differences. That is a good pace and in principle it does not need to be higher. It is an acceptable rate, which will ensure the necessary stability in the banking system, as well as maintain macroeconomic stability.
Vladimir Putin: Are gold and foreign currency reserves growing?
Sergei Ignatiev: They were growing until recently; at the moment, they stand at approximately $407 billion. But given that we have halted the Central Bank's purchase of currency and shares, as we do not need to limit the strengthening of the rouble, its level in relation to foreign currency is satisfactory. As I see it, we are in a very comfortable position; therefore, in recent weeks, we have not been buying foreign currency on the currency markets, and our gold and foreign currency reserves have stabilised, which is normal.
Vladimir Putin: And now they stand at $407 billion, but what were they in February, approximately?
Sergei Ignatiev: In February they sank to $380 billion.
Vladimir Putin: And another question. About a month and a half ago you told me that a significant proportion of major Russian commercial banks hold large currency reserves on Central Bank accounts at an interest rate of virtually zero. We have spoken about the need for this to change, and here I have in mind financing the real economy sector and other operations of our commercial banks. What is happening now?
Sergei Ignatiev: The maximum remaining balance of foreign currency in Central Bank accounts was in February.
Vladimir Putin: How much was that?
Sergei Ignatiev: It was over $40 billion. Now that sum has significantly decreased. It is not static, it fluctuates, somewhere in the region of $14-$18 billion. I think that figure will decrease in the coming months. It is a normal occurrence, with no surprises there.
Vladimir Putin: It nonetheless indicates that the banks are beginning to use their resources more actively.
Sergei Ignatiev: They are finding uses for them, above all in the real economy sector, such as using them for foreign currency loans to Russian borrowers.
There is one problem in particular I would like to mention: unfortunately, there has not been a recovery of growth in Russian bank lending.
Vladimir Putin: What is its pace today, approximately?
Sergei Ignatiev: Over the last five months, from January to May inclusive, if again one excludes the influence of the exchange rate differences, then the increase has been practically zero on average per month. In fact, there has been a small growth of 1.3% at state-controlled banks, but at the rest of the banks there was a decrease of approximately the same amount. Overall, it works out as zero. The working data I have for June is very preliminary. It indicates that lending growth has not been restored. So far, unfortunately at that level ...
Vladimir Putin: How, in your opinion, is work proceeding at various Government agencies, institutions and ministries regarding government refinancing?
Sergei Ignatiev: Here, not all efforts have been on target. To begin with, federal budget allocations are lagging behind plan, with spending put off until the end of the year, while we need the money now.
Vladimir Putin: That is something that happens here almost every year.
Sergei Ignatiev: Yes, this happens almost every year. But in this crisis year it is especially important to ensure that spending is more evenly spread throughout the course of the year. And the second problem is that unfortunately the mechanism of state guaranteed loans for strategic industries is not up and running.
Vladimir Putin: Sorry, forgive me for interrupting you, but let's continue talking about the banks.
Sergei Ignatiev: Banks fear lending to the real sector, in part because of the high credit risks there. If, for example, at the end of last year, I assessed the situation as follows, that the fundamental problem was a lack of resources, then currently the banks have sufficient resources. Moreover, they are encouraging our citizens to save, and in that case, in part thanks to the savings they have attracted, they are actively extinguishing their debt to the Central Bank.
We have, in our time, given large sums in loans to replace the resources withdrawn, and it is those deposits made by the population which then left the bank, as well as foreign creditors' loans, which banks were also duty bound to extinguish. We made resources available to replace them.
Now, the banks are actively extinguishing their debts to the Central Bank, in spite of the radical fall in interest rates at the Central Bank. In part due to unsecured auctions, the interest rates reached nearly 19% in March. They are now lower than 14%, so that is a five percentage point decrease. Currently, Central Bank resources on unsecured loans have become cheaper for the commercial banks. Nonetheless, loans are being paid off and are not being used for lending mostly because of high lending risks.
That is why this mechanism of offering guarantees needs to be fixed. The sooner this is accomplished, the better the situation will be, while we have spoken about this already many months ago. In principle, everything is ready for this to be done.
The second problem is the increase in extensions on bank loans to the real economy sector. In May, this growth slowed but nonetheless it continues. I, frankly speaking, am investigating this problem very thoroughly, but do not see anything catastrophic in this process. That is to say that it is a normal process which would happen during any kind of crisis. The fact that this growth has slowed is already a good thing.
If the mechanism of offering state guarantees is working, then I think this problem will, to a great extent, be resolved. Not fully, but to a great extent. In addition, as I understand, the Government is willing to extend the practice of offering subsidised loans to Russian commercial banks; what's more, a draft law has been prepared on the possible acquisition of commercial banks' preferred shares via payment with federal loan bonds. This is also a useful mechanism. And it might not be needed now but it is quite possible that in several months time it will be possible to use it.
On the whole, I consider the situation to be stable. There are good conditions for recovery not only in loans made to the real economy sector, but also in restoring overall economic growth, as, most importantly, those external crisis factors that brought about the crisis in our economy are no longer having an effect. The oil price has normalised, and if the outflow of capital has not stopped, it has decreased dramatically. And a great deal depends on us.
Vladimir Putin: Mr Ignatiev, a question that came up frequently during my meetings with heads of the Russian regions, was that the Central Bank should be more active and bold, at least in its dealings with the major regional banks. They hold that such work would have a faster effect on the so-called funding bottlenecks, which we talk about so much.
Sergei Ignatiev: That is how we are operating. Although in fact in as much as half the Russian banks are Moscow banks, then we are working more closely with Moscow banks than regional banks.
Vladimir Putin: The governors stress that the money reaches Moscow banks before regional ones, and that this is the link in the chain which creates certain difficulties. That is why they consider it possible, all the more so since all these banks work under the guarantees of regional governments and their reliability is quite high. It would seriously improve the situation.
Sergei Ignatiev: I will pay close attention to that.
Vladimir Putin: Mr Ignatiev, at the end of last year and the beginning of this year, we have accomplished a great deal together to stabilise the situation in the Russian financial sector, and overall we have got to grips with the task in hand, as the real indicators testify. Now we need to jointly take additional measures to ensure that this stabilisation in the banking sector has a greater positive effect on the real sector of the economy.
