{ "title": "Interview with Russian Central Bank Governor Elvira Nabiullina – IMF Finance & Development Magazine | March 2019", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2019/03/interview-with-russian-central-bank-governor-elvira-nabiullina", "canonical": "https://www.imf.org/en/publications/fandd/issues/2019/03/interview-with-russian-central-bank-governor-elvira-nabiullina", "overlayPath": "/en/publications/fandd/issues/2019/03/interview-with-russian-central-bank-governor-elvira-nabiullina/index.md", "summary": "Russian Central Bank governor Elvira Nabiullina explains how bold policy action helped Russia avert a deeper recession and reform the banking sector.", "sections": [ { "heading": "Overview and context", "content": "- Elvira Nabiullina became governor of the Central Bank of Russia in 2013 amid plunging oil prices, geopolitical tensions, and sanctions.\n- By December 2014 the exchange rate and the banking system were under severe pressure and the economy was heading into recession.\n- Policy actions taken: float the exchange rate, announce immediate move to inflation targeting, and step up banking reform.\n- Recognition mentioned: named 2015’s Central Bank Governor of the Year by Euromoney magazine and 2016’s Best Central Bank Governor in Europe by The Banker; delivered the Michel Camdessus Central Banking Lecture at the IMF in September 2018." }, { "heading": "Rationale for adopting inflation targeting", "content": "- Intended effects:\n - Reduce inflation and maintain it consistently at a fairly low level.\n - Manage inflation expectations through policy actions.\n- Preconditions and preparatory steps taken before the formal switch:\n - Developed tools to refinance banks to enable interest rate policy transmission.\n - Gradual move to a more flexible exchange rate (from fairly strictly managed to floating).\n - Developed capacity in models, projections, and analysis.\n- Assessment after four years: framework suits emerging market economies like Russia; many countries have adopted inflation targeting and no examples known of official reversions." }, { "heading": "Floating the exchange rate", "content": "- Timing and rationale:\n - Exchange rate floated at the peak of the crisis in late 2014; decision seen as necessary rather than postponable.\n - Nabiullina argued that intervening would have depleted reserves and delayed inevitable float.\n- Benefits observed:\n - Floating exchange rate absorbed external shocks and facilitated rapid balance of payments adjustment.\n - Example: early 2016 fall in oil prices had unremarkable effects on financial markets due to the floating exchange rate.\n- Implementation notes:\n - Exchange rate was floated gradually; a widened corridor preceded full float.\n - Importance stressed of actually floating during stress to change expectations; intervening would have encouraged expectations of further devaluation." }, { "heading": "Communications and building public support", "content": "- Communications were crucial during the transition to inflation targeting and the floating exchange rate.\n- Measures taken to expand communications toolkit:\n - Announced dates of Board meetings a year in advance (not done before).\n - Began holding press conferences and providing more analytical materials, reports, interviews, and surveys.\n - Arranged meetings with investors and analysts; engaged with regions (business, analysts, regional leadership).\n- Communication objectives:\n - Ensure markets, broader business audience, and public understand and trust policy.\n - Manage expectations: achieving announced targets was fundamental to credibility.\n - Shift focus from specialized analysts to broader public to build confidence in ruble assets and planning horizons." }, { "heading": "Withstanding pressure and monetary policy stance", "content": "- Strategy to resist pressure for faster rate cuts: consistent policy implementation demonstrating that high interest rates curb inflation and allow rates to fall as inflation declines.\n- Observed outcomes supporting policy:\n - Mortgage lending expansion began in 2016-2017 as inflation outlook improved.\n - Present economic growth rate described as close to potential growth rate of 1½ to 2 percent.\n - Historically low unemployment cited as further evidence.\n- Reaction to VAT-driven inflation spike:\n - Temporary increase in inflation mostly because the VAT rate was increased.\n - Central bank raised the key rate to prevent inflation from upward spiraling.\n - Expectation stated: inflation to reach as much as 5.5-6% by the end of Q1, and then start decreasing." }, { "heading": "Assessment of inflation targeting results and hindsight", "content": "- Inflation targeting and floating exchange rate judged to be working: reduced inflation and increased economy’s resistance to external shocks.\n- Achievements:\n - Greater confidence in ruble assets and de-dollarization of deposits (regulatory measures also contributed).\n- Hindsight:\n - Some fine-tuning possible, but strategic decision seen as correct.\n - Critics argued interventions should have limited exchange rate overshooting; Nabiullina argued the overshoot stage was necessary to change expectations.\n - Earlier adoption a few years before 2014 “possibly” would have been better; a month or two earlier would have changed little." }, { "heading": "Banking sector reform", "content": "- Problems identified in the banking sector:\n - Insufficient genuine capital due to rapid emergence in the early 1990s and limited capital inflows thereafter.\n - Deterioration in asset quality following the 2008 and 2014-2015 crises.\n - Unscrupulous practices: owners using banks to finance their own businesses, poor risk management, money laundering.\n- Actions taken:\n - Revoked about 400 licenses from unstable and fraudulent banks.\n - Restructured three large banks, resulting in an increase in the share of state ownership in the banking sector.\n - Aim to build regulation and supervision that treats banks equally regardless of state share; intend to return temporarily state-held bank shares to the market when possible.\n- Rationale: ensure a stable, strong financial system that can support economic growth and avoid repeated large infusions." }, { "heading": "Mega-regulator reform (central bank oversight of nonbank sector)", "content": "- In 2013 the central bank assumed responsibility for nonbank financial institutions and securities commission functions, creating a “mega-regulator.”\n- Benefits observed:\n - Ability to take a consolidated view of financial groups that include banks, insurance companies, private pension funds—helpful when restructuring large groups.\n - Reduces regulatory arbitrage and facilitates uniform approaches and standards.\n - Better oversight of shadow banking as risks migrate across sectors.\n- Drawbacks and institutional challenges:\n - Potential public demand for the central bank to solve banks’ problems by issuing money—creates pressure between monetary policy and supervisory functions.\n - Need to build internal “walls” between banking supervision and monetary policy." }, { "heading": "Leadership, governance, and principles", "content": "- Key leadership qualities emphasized:\n - Surround yourself with strong professionals; stimulate debate and make decisive choices without deviation.\n - Staff must understand they work for the public good and long-range goals; deliver on promises to society.\n - Consistency during turbulent times is critical; late decisions carry high societal costs.\n- On independence:\n - Nabiullina noted that pressure and criticism remain; success derives from consistent policy implementation and preparatory work preceding her tenure.\n\nInterview with Elvira Nabiullina, IMF Finance & Development Magazine, March 2019\n\n---\n\n Content in this bundle\n\n- في خندق العمل\n - في خندق العمل (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - في خندق العمل (PDF){rel=\"external\" type=\"application/pdf\"}\n- En pos de la estabilidad ● Finanzas y Desarrollo ● Marzo de 2019\n - En pos de la estabilidad ● Finanzas y Desarrollo ● Marzo de 2019 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - En pos de la estabilidad ● Finanzas y Desarrollo ● Marzo de 2019 (PDF){rel=\"external\" type=\"application/pdf\"}\n- En première ligne : À la recherche de la stabilité\n - En première ligne : À la recherche de la stabilité (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - En première ligne : À la recherche de la stabilité (PDF){rel=\"external\" type=\"application/pdf\"}\n- Interview with Russian Central Bank Governor Elvira Nabiullina\n - Interview with Russian Central Bank Governor Elvira Nabiullina (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Interview with Russian Central Bank Governor Elvira Nabiullina (PDF){rel=\"external\" type=\"application/pdf\"}\n- На передовой. Стремясь к стабильности – Финансы и развитие – март 2019 года\n - На передовой. Стремясь к стабильности – Финансы и развитие – март 2019 года (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - На передовой. Стремясь к стабильности – Финансы и развитие – март 2019 года (PDF){rel=\"external\" type=\"application/pdf\"}\n- 实施稳健的政策 - 前  沿 - 金融与发展\n - 实施稳健的政策 - 前  沿 - 金融与发展 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - 实施稳健的政策 - 前  沿 - 金融与发展 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2019/03/interview-with-russian-central-bank-governor-elvira-nabiullina" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2019/03/interview-with-russian-central-bank-governor-elvira-nabiullina/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2019/03/interview-with-russian-central-bank-governor-elvira-nabiullina/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2019/03/interview-with-russian-central-bank-governor-elvira-nabiullina/bundle-manifest.json)", "Published: March 1, 2019", "Elvira Nabiullina became governor of the Central Bank of Russia in 2013 amid plunging oil prices, geopolitical tensions, and sanctions.", "By December 2014 the exchange rate and the banking system were under severe pressure and the economy was heading into recession.", "Policy actions taken: float the exchange rate, announce immediate move to inflation targeting, and step up banking reform.", "Recognition mentioned: named 2015’s Central Bank Governor of the Year by Euromoney magazine and 2016’s Best Central Bank Governor in Europe by The Banker; delivered the Michel Camdessus Central Banking Lecture at the IMF in September 2018.", "Intended effects:", "Preconditions and preparatory steps taken before the formal switch:", "Assessment after four years: framework suits emerging market economies like Russia; many countries have adopted inflation targeting and no examples known of official reversions.", "Timing and rationale:", "Benefits observed:", "Implementation notes:", "Communications were crucial during the transition to inflation targeting and the floating exchange rate.", "Measures taken to expand communications toolkit:", "Communication objectives:", "Strategy to resist pressure for faster rate cuts: consistent policy implementation demonstrating that high interest rates curb inflation and allow rates to fall as inflation declines.", "Observed outcomes supporting policy:", "Reaction to VAT-driven inflation spike:", "Inflation targeting and floating exchange rate judged to be working: reduced inflation and increased economy’s resistance to external shocks.", "Achievements:", "Hindsight:", "Problems identified in the banking sector:", "Actions taken:", "Rationale: ensure a stable, strong financial system that can support economic growth and avoid repeated large infusions.", "In 2013 the central bank assumed responsibility for nonbank financial institutions and securities commission functions, creating a “mega-regulator.”", "Benefits observed:", "Drawbacks and institutional challenges:", "Key leadership qualities emphasized:", "On independence:", "**في خندق العمل**", "**En pos de la estabilidad ● Finanzas y Desarrollo ● Marzo de 2019**", "**En première ligne : À la recherche de la stabilité**", "**Interview with Russian Central Bank Governor Elvira Nabiullina**", "**На передовой. Стремясь к стабильности – Финансы и развитие – март 2019 года**", "**实施稳健的政策 - 前  沿 - 金融与发展**" ], "related": [ { "title": "في خندق العمل", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/march/ar/trenches.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/march/ar/trenches.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/march/ar/trenches.pdf", "mime": "application/pdf" } }, { "title": "En pos de la estabilidad ● Finanzas y Desarrollo ● Marzo de 2019", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/march/es/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/march/es/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/march/es/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf", "mime": "application/pdf" } }, { "title": "En première ligne : À la recherche de la stabilité", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/march/fr/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/march/fr/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/march/fr/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf", "mime": "application/pdf" } }, { "title": "Interview with Russian Central Bank Governor Elvira Nabiullina", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2019/march/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2019/march/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2019/march/interview-with-russian-central-bank-governor-elvira-nabiullina.pdf", "mime": "application/pdf" } }, { "title": "На передовой. 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