Russian gov’t eyes to place in central bank

MOSCOW - Reuters

Russia’s President Vladimir Putin (C) chairs the Cabinet Meeting in Moscow. The government may have representation in the Central Bank’s board. AFP photo

The Russian government may gain representation on the board of the Bank of Russia as part of an overhaul of the regulation of financial markets, the Interfax news agency reported today.

Such a proposal is being considered under reforms to unify financial regulation being overseen by First Deputy Prime Minister Igor Shuvalov, although “there are a lot of opponents”, Interfax said, citing its source.

“Bearing in mind that government functions are being transferred to the central bank, there is an idea to introduce to the board of the central bank one or more government representatives to exercise oversight,” it added.

Any high-level government representation at the central bank is likely to raise serious concern over the institution’s independence at a time when the Kremlin is complaining that high interest rates are choking off Russian economic growth.

Central bank Chairman Sergei Ignatyev, who favours a tight rein on monetary policy, retires in June and speculation is mounting that President Vladimir Putin will nominate a successor more in tune with his desire to boost flagging economic growth.

Hungarian example

Political influence over central banks is spreading across ex-communist eastern Europe as leaders resort to pro-growth policies to shake off the after-effects of the 2008-09 slump.

Hungarian Prime Minister Viktor Orban has led the way by filling his country’s central bank with appointees favouring his economic policies, a move that critics say is undermining independence.

Shuvalov, who is pushing the project to house a financial ‘mega-regulator’ under the roof of the central bank, has been one of the government leaders who have called most vocally for interest rate cuts.

The central bank’s policy-making board has 11 members and is dominated by orthodox economists including First Deputy Chairman Alexei Ulyukayev, Ignatyev’s most senior deputy, and Deputy Chairman Sergei Shvetsov, responsible for market operations.