He does not think what has been going on in Russian banking for several months now can be qualified as a crisis, the MP said to a news conference in Moscow today.
Skyrocketing global petroleum prices may do a bad turn to the world and Russian economy, he admits. To substantiate his point, the expert looked back at a sweeping crisis of the 1970s as oil prices plummeted after a long upswing. Governments and industries started ambitious investment in energy-saving technologies, which promoted many technical breakthroughs-in particular, new fuels were invented. Mr. Medvedev does not rule out the developments of three decades ago re-enacted within the next ten years or so as petroleum demands may shrink to send prices down.
"The alarm has sounded," he commented on a record-breaking $44 a barrel of the few preceding days. The expert, however, does not think the huge price will hold on even for half a year.
The MP next turned to Russian banking developments of the several preceding months, which robbed bankers of close on 10 per cent of total assets. Instability made clients remove deposits from banks.
Private exchanges of roubles into foreign currency made an impressive $1.8 billion last June alone, reports the Central Bank of Russia. That was removed deposits, supposes Medvedev.
As they exchange their roubles into foreign moneys, chiefly US dollars, the people-in-the-street never guess they are coming up as Central Bank assistants in its efforts to keep down the rising rouble's pace. Thus, June did not get the rouble any higher vs. the dollar, and even pushed it somewhat down, say statistical reports of the Central Bank and the Ministry of Economic Development and Trade. "Objectively, however, it wasa Russian economic loss and a godsend to President George Bush," remarked the parliamentarian.
The Central Bank is really hard put now doing all it can to keep the dollar up vs. the rouble, nominally at least, he added.
Petroleum prices and currency rates defy prognostication now. The Yukos controversy and expectations of upcoming Iraqi developments have an impact on both, Medvedev pointed out.
As for unlicensing certain banks, the Central Bank of Russia is doing that in compliance with the acting legislation-it has to reimburse creditors' losses if it fails to unlicense a problem bank in due time.
Small banks account for an overwhelming majority in Russia. They base in tiny towns and have small companies for a bulk of their clients. Pavel Medvedev thinks such banks have found their niche in the banking sector. The year 2007 will usher in a proviso to ban small banks to drop down capital. "If they are thrifty with their little money and don't waste it, no one will hurt them," he reassured.
It will take Russia five years to make a full-fledged banking and crediting network, expects the MP. That will be the time the public-at-large needs to see that the deposit insurance law does work. The people-in-the-street "can grasp it only when they see banks ruined and their clients receiving their 100,000 roubles [top insurance reimbursement sum] within seven days, as the law stipulates".
A credit record bill will be passed, autumn next. It will also require five years to make an effect-enough for bankers to stock up reliable information about their debtors.
The new law will do the most good to small business and private persons. Big companies are legally entitled, as it is, to a sizeable degree of transparency even since their establishment, while credit records of small enterprise are not kept now. That is why bankers appoint high interest rates to compensate tentative losses, said Pavel Medvedev.
The new law "will open new vistas to conscientious small entrepreneurs. They will insist on having their credit records kept. They will realise that particular conduct will help them to borrow at a smaller interest. The same pattern will repeat for private persons."
As the parliamentarian sees the matter, Russia needs another five to seven years to double its gross domestic product, and so send public incomes up. All that offers bankers a medium-term prospect of increasing assets for loans to private persons and corporate manufacturers, he said.
