Russia » Economics
Author`s name Michael Simpson

Euro Instead of Guarantees - 9 January, 2003

The struggle between the Central Bank and the Ministry of Finance on one side, and commercial banks on the other side lasted for almost the whole of the past year. Private banks, with assistance of the Russian Union of Businessmen and Industrialists are striving for a complete currency liberalization and for abolishment of the obligatory sale of 50% of currency proceeds at fixed prices. The RF Central Bank and the Ministry of Finance in their turn are trying to make commercial banks guarantee deposits of the population so that volumes of deposits could increase.

In both cases, abnormal and inconsistent compromises were reached. The government decided that the volume of currency proceeds for obligatory sales would be 35% instead of the previously fixed 50%; it is also allowed to sell this share on the off-exchange market as well. However, it will be possible not now, but later. A law of the Russian Federation “On currency regulation and currency control” was submitted to the State Duma, but the deputies are currently in recess.

The idea of guarantees of deposits is developing into the idea of “insurance of deposits.” As a matter of fact, the adopted law on insurance of deposits insures only penny deposits of poor population, and even not completely. Russia’s Sberbank (the Savings Bank) refuses to join the system of deposits’ guarantee.

As a result of the banking reform in Russia, the Central Bank has got the right to demand for replacement of the management of private banks (in fact, the Central Bank can change the management of the banks). And banks must disclose their financial condition completely, provide information concerning their owners and private shareholders.

Triumph of the government is obvious, however the situation hasn’t changed for ordinary Russians. The population still gives no credence neither to the governmental, nor to private banks. The matter of the fact is that dollar, as the best currency for saving money in Russia, is being actively ousted by euro, the popular European innovation.

When euro cash appeared at currency exchange offices in Russia, a “euro boom” broke out in the country. Russians go to Europe oftener than to the USA, indeed, that is why they prefer euro. And although official statistics reports that the volume of euro bank accounts is still insignificant, the Russian population actively exchanges the dollar savings for euro.

On the whole, Russia’s economic self-consciousness hasn’t changed at all. Our national currency, which means the currency secured against any economic changes, is still currency of any other state, not Russia. The result of the previous year: the euro exchange rate in Russia is higher than the same for dollar.

Dmitry Slobodanuk
PRAVDA.Ru

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