#6143
#5
Moscow Times
March 19, 2002
Editorial
Don't Expect Quick Fix of Bank Sector
The resignation of Central Bank chief Viktor Gerashchenko marks the departure of one of the few larger-than-life characters remaining in Russian politics and a man who has played a -- if not the -- dominant role in the banking sector for the best of part of the past decade.
In the deluge of commentary since Friday, one of the chief indictments against Gerashchenko has been that he was the main obstacle to reform of the banking sector. The arrival of the president's candidate Sergei Ignatyev at Neglinnaya -- it is suggested -- will give the green light to reform.
While reformist zeal has never been one of Gerashchenko's strong points, this view seems somewhat simplistic.
The government's attempt to produce a blueprint for banking sector reform in the second half of last year ended in farce. After months of wrangling, involving the Central Bank, government ministries, the State Duma and the Russian Union of Industrialists and Entrepreneurs, the government adopted a plan that barely differed from the Central Bank's initial proposals.
One might conclude from this that Gerashchenko single-handedly scuppered the reformist urges of the government. However, a more likely explanation is that there was no consensus in the government on the issue or simply that there was no clear idea regarding what needed to be done to reform the sector. Under this scenario, Gerashchenko serves as a convenient whipping boy for the government.
So, will parachuting Ignatyev in from the Finance Ministry to the Central Bank provide the necessary impetus for major reforms, just as Putin's appointment of Alexei Miller to Gazprom was seen as paving the way for serious changes at Gazprom?
It would seem a little optimistic. The problems of the banking sector are inseparable from the broader problems besetting the economy. Bank lending to the real economy will remain minute, while the legal system is weak and the legal recourse for creditors to recover loans remains limited.
It would require Herculean might to make a dent here. Ignatyev would do better to focus his energies on putting the Central Bank's house in order.
He'll certainly have his work cut out. The Central Bank has a swollen bureaucracy; its approach to banking regulation can only be described as a Soviet-style triumph of form over substance; transparency is not a strong point; and its role as both regulator and major market player provides serious potential for conflict of interests. Add to that the need to insulate the Central Bank from undue influence from big business, and Ignatyev will have more than enough to be getting on with.
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