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DEPUTY CHAIRMAN OF RUSSIAN CB: THE CRISIS IN WORLD FINANCIAL MARKETS SHOWED THAT THE MODEL OF SINGLE FINANCIAL MEGAREGULATOR IN STRUCTURE OF CENTRAL BANKS COMPLETELY JUSTIFIED ITSELF
ArmInfo Agency, Armenia
Oct 8 2007
ArmInfo. The crisis in the world financial markets, which arose due
to the underestimation of risks in the US mortgage market, showed that
the model of a single body that conducts monetary policy, regulates and
controls financial markets the way it was done in Russia and Armenia,
is correct and the most reasonable one, Alexey Ulyukayev, the first
deputy chairman of the Russian Central Bank, made this statement in
his lecture delivered at the Yerevan State University, Monday.
According to him, if the monetary function is linked with the
regulation and control functions, the problems in the financial market
may be solved at the initial stage of their formation. He noted that
problems should be solved locally, in a separate weak link, and one
should apply all the necessary mechanisms to render a sufficient
stabilizing support. As a reverse example, A.Ulyukayev spoke about
Great Britain, where the Bank of England is engaged only in monetary
policy, inflation and interest rates. "And now that English banks have
found themselves in a problem situation, there is nobody to support
them. Because the one who must support them (SEC) has no funds,
and the Bank of England is not empowered to do this.
Now they have to find solutions, create joint working groups, etc.,"
he said. "Therefore, unification of monetary, regulating and control
functions is the imperative of our era, and many countries started to
understand that they shouldn't have criticized us," A.Ulyukayev added.
Speaking of the Russian CB's policy, he stressed that the Bank of
Russia forecasts that the volumes of bank refinancing will increase as
a result of decrease of the banking system's liquidity, and they will
reach their peak in October. Every day the Russian CB will give 300-400
bln rubles. These short-term resources should go through the whole
banking system to restore the inter-bank mechanism. The CB stresses
that the period of cheap money is over, perhaps, irretrievably. The
demand for liquidity is higher than the supply.
The credit price will grow and Libor will reach high historic
estimations. The growth of spreads, borrowings by 8-10% yearly interest
is normal, he thinks. Many banks can't receive foreign funding,
therefore the growth of money price inside Russia is higher than the
world price. "There is nothing bad in it. Another thing is abnormal -
when the money price is higher than the inflation rate," he noted.
ArmInfo Agency, Armenia
Oct 8 2007
ArmInfo. The crisis in the world financial markets, which arose due
to the underestimation of risks in the US mortgage market, showed that
the model of a single body that conducts monetary policy, regulates and
controls financial markets the way it was done in Russia and Armenia,
is correct and the most reasonable one, Alexey Ulyukayev, the first
deputy chairman of the Russian Central Bank, made this statement in
his lecture delivered at the Yerevan State University, Monday.
According to him, if the monetary function is linked with the
regulation and control functions, the problems in the financial market
may be solved at the initial stage of their formation. He noted that
problems should be solved locally, in a separate weak link, and one
should apply all the necessary mechanisms to render a sufficient
stabilizing support. As a reverse example, A.Ulyukayev spoke about
Great Britain, where the Bank of England is engaged only in monetary
policy, inflation and interest rates. "And now that English banks have
found themselves in a problem situation, there is nobody to support
them. Because the one who must support them (SEC) has no funds,
and the Bank of England is not empowered to do this.
Now they have to find solutions, create joint working groups, etc.,"
he said. "Therefore, unification of monetary, regulating and control
functions is the imperative of our era, and many countries started to
understand that they shouldn't have criticized us," A.Ulyukayev added.
Speaking of the Russian CB's policy, he stressed that the Bank of
Russia forecasts that the volumes of bank refinancing will increase as
a result of decrease of the banking system's liquidity, and they will
reach their peak in October. Every day the Russian CB will give 300-400
bln rubles. These short-term resources should go through the whole
banking system to restore the inter-bank mechanism. The CB stresses
that the period of cheap money is over, perhaps, irretrievably. The
demand for liquidity is higher than the supply.
The credit price will grow and Libor will reach high historic
estimations. The growth of spreads, borrowings by 8-10% yearly interest
is normal, he thinks. Many banks can't receive foreign funding,
therefore the growth of money price inside Russia is higher than the
world price. "There is nothing bad in it. Another thing is abnormal -
when the money price is higher than the inflation rate," he noted.