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Russia: Central Bank Head Tenders Resignation

  • Francesca Mereu

The 64-year-old chairman of the Russian Central Bank, Viktor Gerashchenko, resigned on 15 March. Foreign investors and Russian experts alike had criticized the Central Bank head for propping up the ruble and for being slow to reform the country's banking system. President Vladimir Putin has asked parliament to accept Gerashchenko's resignation and to approve First Deputy Finance Minister Sergei Ignatiev as his successor.

Moscow, 19 March 2002 (RFE/RL) -- Five months before his term was due to expire, Viktor Gerashchenko, the head of Russia's Central Bank, offered his resignation, citing health concerns.

The Russian parliament is expected to accept his resignation and approve as his successor the man tapped by Russian President Vladimir Putin as his top choice for the post -- 54-year-old First Deputy Finance Minister Sergei Ignatiev.

Gerashchenko faced regular criticism during two separate terms at the helm of the Central Bank, which has been accused of widespread corruption and is notorious for its opaque and outdated system. Gerashchenko's resistance to reforms earned him little support in Putin's Kremlin. Former Economic Minister Yevgenii Yasin, in televised remarks on 15 March, said: "This should have been done a long time ago. [Gerashchenko] is a highly competent person in his field and followed the policies he believed to be correct, [but] he is a barrier in the road to reform."

Some in the banking sector were nonetheless surprised by his resignation. Mikhail Alekseyev is deputy chairman of the board of Rosbank, one of Russia's largest banks. He says Gerashchenko's resignation was unexpected, and may signal a change in the country's banking system: "I think that the change of the [Central Bank] head is likely to cause some changes in the [Russian] banking system. There may be a more liberal policy and a more open policy that may allow foreign banks to operate [in Russia]. But so far it is difficult to say what direction the [Central Bank] is going to take. [In any case], I don't think there will be radical changes."

Russian media subsequently offered commentary about what a switch to Putin nominee Ignatiev might mean for the Central Bank. Some said the change would add momentum to reforms in the Russian banking sector. But others, like Alekseyev, warned that the ruble may be set for a fall as Ignatiev, a more liberal economist than Gerashchenko, may devalue the ruble to improve the Russian export sector.

"The former Central Bank management was quite serious about backing the national currency, the ruble. [But] I think the new management won't back the ruble so seriously and there may be some smooth devaluation. I think that such a move will be in the interests of those export-oriented fields [of our economy]. Whether it's better [for the Russian economy] to have a weak or a strong ruble depends on the aims of the [future Central Bank] economic policy. But I believe that a certain degree of devaluation wouldn't be dangerous [for our economy]," Alekseyev said.

But Ignatiev, in an interview with the daily "Vremya Novostei," described the Central Bank's ruble policy as "correct" and said there is no need to change it, "at least in the near future." For now, the ruble has remained stable at 31 to the dollar.

Christof Ruelh, a senior economist with the World Bank in Moscow, says he does not expect any significant changes regarding ruble policy:

"Russia needs steadiness, and the [anticipated] new chairman of the Central Bank Ignatiev has already announced that he will not change the exchange rate policy. So we don't expect any changes there. I think that also one should not be too harsh with Mr. Gerashchenko because for the years after the 1998 [financial] crisis he managed to keep the banking sector on a steady course and that was a positive accomplishment," Ruelh says.

The changes come amid parliamentary debate over proposed amendments to the Law on the Central Bank, which Gerashchenko angrily criticized in an unscheduled speech before the Duma (lower house) just hours before his resignation was accepted by Putin. A commentary in the "Kommersant" business daily on 16 March suggested that Putin demanded Gerashchenko's resignation for failing to compromise on the status of the Central Bank and for a number of economic setbacks, including the growth in inflation this year.

A former chairman of Gosbank, the Soviet-era state bank, Gerashchenko was fired after two years at the helm of the Central Bank after the ruble plunged 30 percent in a single day in 1994. He was reinstated following the August 1998 crisis; his mandate was due to expire in September.