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Capital controls to push Russia many years back — Central Bank chief

October 02, 2014, 12:10 UTC+3 MOSCOW
Absence of capital controls is an important achievement of economic policy of the previous period
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Central Bank chief Elvira Nabiullina

Central Bank chief Elvira Nabiullina

© ITAR-TASS/Anton Novoderezhkin

MOSCOW, October 2. /ITAR-TASS/. Restrictions on the free movement of capital will push Russia many years back, Central Bank chief Elvira Nabiullina said on Thursday.

“We believe this [the absence of capital controls] is an important achievement of economic policy of the previous period,” Nabiullina said at an investment forum organized by Russia’s VTB Bank.

“The abandonment of this achievement may push us many years back,” the Central Bank chief said.

Russian monetary regulator understands the business community’s concerns that access to external markets has been tightened and Russian banks and companies are in a difficult position, Nabiullina said.

The reports that the regulator may restrict the movement of capital “are absolutely unfounded,” the Central Bank chief said.

Russian ruble hits new record low

The news agency Bloomberg reported on Tuesday with reference to informed sources that the regulator was considering restricting the movement of capital.

This report caused panic on the Russian foreign exchange market, prompting large-scale purchases of the US dollar. Meanwhile, the ruble registered a new record low while the value of the bi-currency basket surged beyond the upper limit of the floating band (44.40 rubles), forcing the Central Bank to start foreign exchange interventions.

The Central Bank of Russia said on Wednesday in response to TASS’s inquiry that it would probe suspected market manipulation after reports on capital controls.

“In order to ensure fair pricing of financial instruments, the Bank of Russia intends to analyze the situation to reveal the signs of market manipulation,” the Central Bank’s press office said.

Capital outflow

Central Bank chief Elvira Nabiullina said she's not ruling out that Russian capital outflow in 2014 may exceed forecast of $90 billion. 

“The capital outflow may be more than $90 billion as there are many factors influencing it and their influence in the near future cannot be predicted,” Nabiullina told journalists.

Nabiullina added than in the past few months there has been a sharp decrease in the capital flight. “But of course, there is some uncertainty,” she said.

Central Bank will keep fighting capital outflow based on shady reasons, Nabiullina told.

“We will fight shady capital outflow, of course. We are doing it and, according to our data, it has been decreasing,” Nabiullina said.

In early September, Russian Central Bank deputy chairman Mikhail Sukhov said at the XII international banking forum that the volume of shady operations in Russian banks dropped in the second quarter of 2014 to $1.6 billion.

Sukhov said that out of 76 banking licenses revoked over the period, 52 revocations were connected with conducting dubious operations.

Over the same period, “41 banks independently took appropriate measures to stop holding shady operations through working with clients and forming a proper system of internal control,” the deputy chief of the Russian Central Bank said.

The Economic Development Ministry said in its forecast in late September that capital outflow in 2014 may range from $90 billion to $120 billion.

In the first six months of the year, the capital flight hit $74.6 billion, including $48.8 billion in the first quarter and $25.8 billion in the second quarter.

Russian Deputy Economic Development Minister Alexey Vedev said the capital outflow was triggered by “external and internal political risks.”

Russian presidential adviser Sergey Glazyev on Wednesday offered to toughen supervisory measures over capital flight.

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