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New Russian c.bank chief seen as welcome reformer
By Julie Tolkacheva
MOSCOW, March 18 (Reuters) - Russia's surprise new central bank chief is likely to focus on desperately-needed banking reform, albeit gradually, and leave monetary policy largely as it is, analysts said on Monday.
The heavily-criticised outgoing chairman, Viktor Gerashchenko, quit on Friday and President Vladimir Putin immediately asked parliament to approve First Deputy Finance Minister Sergei Ignatiev as successor.
"It is a strong, confident, enlightened move by the president and better than anything we had expected," brokererage UFG said in a research note.
Gerashchenko's skills in helping the country stay afloat in its 1998 financial crisis came to be seen as a brake on the economy and he was particularly criticised for dragging his feet on reform of Russia's damaged and inefficient banking system.
Ignatiev was deputy central bank chief in the early 1990s. He later moved to the Finance Ministry where he was responsible for macroeconomic policy and relations, sometimes prickly, with the central bank. At the ministry he earned a reputation for being cautious and honest.
Ignatiev, widely expected to be confirmed by legislators later this week, warned against expecting rapid change.
"Necessary and unavoidable changes in the banking sphere are a matter of years, not months," he told the Vedomosti daily.
Under Putin, Russia has implemented a wide range of reforms but bankers say their industry could become the Achilles' heel in expected economic growth.
The banking system is dominated by one huge bank -- Sberbank (SBER.RTS) -- which alone enjoys central bank guarantees on household deposits, one of the cheapest and longest-term sources of money.
It controls over 70 percent of such deposits leaving the more than 1,000 other Russian banks to scramble for the rest and complain that they can only offer short-term and expensive loans.
Analysts have long said that there are too many banks in Russia and the smaller ones need to merge with bigger institutions or disappear.
However, Yuliya Tseplyayeva, an analyst with ING Barings, said she expected Ignatiev to prepare and send dozens of bills necessary for banking sector reform to parliament very quickly.
"Reforms will at last start," she said.
ROUBLE POLICY
Ignatiev said he was inclined to stick to the policy of keeping the rouble stable pursued by Gerashchenko, whom exporters had been pressuring to let the rouble drop faster.
"I think the rouble rate is not too low or too high. It reflects current market trends," he told Vedomosti. "This is normal and one should not introduce anything articifial in the central bank currency policy."
But most analysts said the rouble would be even more stable under Ignatiev, seeing him as likely to bring better relations between the central bank and the government.
"A more coordinated policy of the finance minitry and the central bank will be carried out now," said Konstantin Korishchenko, a managing director at Troika Dailog and a former colleague of Ignatiev.
Tseplyayeva forecast the rouble would firm five percent this year in real terms and central bank reserves would rise to $39-40 billion by the end of the year from $37 billion now.
However, Alfa-Bank said in a research note that Ignatiev would target a quicker rouble depreciation.
"Not only is the exchange rate likely to drop to a level of 31.2-31.3 roubles to the dollar before the end of March, the year-end rate will probably be close to 35 roubles per dollar," it said.
The 2002 budget sets the average rouble/dollar rate at 31.5.
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