Five months shy of the end of his term, Central Bank head Viktor Gerashchenko was dismissed Friday and President Vladimir Putin asked parliament to appoint First Deputy Finance Minister Sergei Ignatyev in his place.
Observers praised the move as a sign that the country's stalled banking reform -- long opposed by Gerashchenko -- would finally move forward but expressed worries that it could evoke an attack on the ruble early in the week.
Ignatyev, 54, whose candidacy is likely to be approved by the Putin-friendly State Duma, said his policy would be to maintain ruble stability for the time being. "I don't believe there is any need to make changes to the [exchange rate] policy, at least in the near future," Ignatyev was quoted by Interfax on Sunday as saying.
In terms of devaluation, Ignatyev said there are "pluses and minuses" but he saw more minuses.
Gerashchenko, 64, will remain in charge of the Central Bank until the Duma approves his replacement and, thus, will be responsible for reacting to any speculative attacks on the ruble when currency markets open Monday.
Gennady Raikov of the People's Deputy faction warned Friday that Gerashchenko's exit could hit the ruble hard.
The Kremlin no doubt was well aware of such a possibility and therefore chose to make the dismissal Friday, said Alexei Moiseyev, economist at Renaissance Capital.
"By announcing the upheaval late Friday evening, the government ensured that the financial sector has had two days to think it over and calm down," Moiseyev said.
Gerashchenko submitted a resignation letter, citing health concerns, to Putin before Friday, presidential administration head Alexander Voloshin said Sunday, according to Interfax.
The unexpected announcement that Putin had accepted the resignation came just hours after Gerashchenko made a strident and unscheduled speech at a Duma hearing on amending the Law on the Central Bank.
"Deputies have been presented a bill that was supposedly agreed with the Central Bank, but you are being deceived," Gerashchenko said, adding that no country has "such a stupid system" as that proposed in the amendments.
Gerashchenko also said the Central Bank had warned Putin that he was being set up with the legislation.
Alexei Gorshkov, head of the government information department, said replacing Gerashchenko with Ignatyev could speed up bank reform, Interfax reported.
Gerashchenko has withstood continual attacks on his policies during his two terms as Central Bank chairman. His 1992-94 term ended with his sacking after the ruble plunged 30 percent in a single day. He was brought back after the 1998 ruble devaluation, and his main achievement since then has been preserving the status quo, despite the Putin government's passion for reforms. He has supported the ruble, resisted all but nominal changes to the banking sector and insisted on tight currency regulations that have big business howling.
"This should have been done a long time ago," former Economics Minister Yevgeny Yasin said in televised remarks Friday. "[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."
"A new time demands new people," Alfa Bank president Pyotr Aven told NTV. "The extremely slow path of banking reforms in the country, or in fact the complete absence of them and the preservation of our inefficient banking system, has no other explanation than his inert thinking."
Ignatyev is seen as scrupulously honest but far more amenable to toeing the government line than Gerashchenko. It is unclear whether he would be able to withstand political pressure to rein in the Central Bank's independence, which Gerashchenko jealously guarded.
A native of St. Petersburg, he is a veteran government economist who served as Gerashchenko's deputy at the Central Bank in 1992-93. His main job at the Finance Ministry was shaping monetary policy with the Central Bank, and he was closely involved in drawing up banking reform legislation, the ministry said.
Finance Minister Alexei Kudrin on Friday praised his deputy as "one of the most experienced specialists in the area of government finance."
"It's a triumph for Kudrin, whose first deputy is now in charge of the Central Bank," said Duma banking committee head Alexander Shokhin on Ekho Moskvy radio. Nonetheless, "working with him would not be easy. He sticks to his views, and it is quite difficult to look for a compromise with him."
The dismissal fits in with Putin's policy over the past year of sweeping away troublesome lords who wouldn't give up their keys to the fiefdom. Rem Vyakhirev, the entrenched lord of Gazprom, also was fired just months before his term was up. Putin installed relative unknown Alexei Miller as Gazprom CEO with clear instructions to return assets stripped from the company.
Next was Railways Minister Nikolai Aksyonenko, fired in January just two months after being charged with abuse of office.
The change may also herald the kick-start of reforms at the Central Bank. "The situation seems to be like that at Gazprom. The task has been assigned," Moiseyev said. "But Ignatyev looks like Miller, and it may take him a long time to get to understand things and get them under control."
Ignatyev could get the chance to handpick his colleagues. In addition to Gerashchenko's post, the terms on six of the Central Bank's other board seats will end in September.
Audit Chamber head Sergei Stepashin was quick in applauding Gerashchenko's sacking, saying it would make the Central Bank much more open and calling Ignatyev "a splendid professional."
The Central Bank was the target of a scathing 70-page report on corruption, published in November by the Moscow Carnegie Center and co-authored by Dmitry Vasilyev, former head of the Federal Securities Commission. The report denounced the Central Bank's bloated, opaque structure, its independence from fiscal or government controls and numerous conflicts of interest. It is both banking sector regulator and owner of foreign and domestic commercial banks; both creditor and owner of borrowers; both keeper of ruble stability and indirect owner of a blocking stake in the Moscow Interbank Currency Exchange; both issuer of audit licenses and subject of audits.
Most infamously, the Central Bank routed IMF loans and $50 billion in hard currency reserves through FIMACO, an offshore vehicle of Central Bank subsidiary Eurobank, between 1993 and 1998 and into the market for short-term treasury bills (GKOs), without its auditor catching on.
Parliament is to discuss Gerashchenko's resignation no later than March 22, said Duma tax committee head Alexander Zhukov, news agencies reported.
Observers praised the move as a sign that the country's stalled banking reform -- long opposed by Gerashchenko -- would finally move forward but expressed worries that it could evoke an attack on the ruble early in the week.
Ignatyev, 54, whose candidacy is likely to be approved by the Putin-friendly State Duma, said his policy would be to maintain ruble stability for the time being. "I don't believe there is any need to make changes to the [exchange rate] policy, at least in the near future," Ignatyev was quoted by Interfax on Sunday as saying.
In terms of devaluation, Ignatyev said there are "pluses and minuses" but he saw more minuses.
Gerashchenko, 64, will remain in charge of the Central Bank until the Duma approves his replacement and, thus, will be responsible for reacting to any speculative attacks on the ruble when currency markets open Monday.
Gennady Raikov of the People's Deputy faction warned Friday that Gerashchenko's exit could hit the ruble hard.
The Kremlin no doubt was well aware of such a possibility and therefore chose to make the dismissal Friday, said Alexei Moiseyev, economist at Renaissance Capital.
"By announcing the upheaval late Friday evening, the government ensured that the financial sector has had two days to think it over and calm down," Moiseyev said.
Gerashchenko submitted a resignation letter, citing health concerns, to Putin before Friday, presidential administration head Alexander Voloshin said Sunday, according to Interfax.
The unexpected announcement that Putin had accepted the resignation came just hours after Gerashchenko made a strident and unscheduled speech at a Duma hearing on amending the Law on the Central Bank.
"Deputies have been presented a bill that was supposedly agreed with the Central Bank, but you are being deceived," Gerashchenko said, adding that no country has "such a stupid system" as that proposed in the amendments.
Gerashchenko also said the Central Bank had warned Putin that he was being set up with the legislation.
Alexei Gorshkov, head of the government information department, said replacing Gerashchenko with Ignatyev could speed up bank reform, Interfax reported.
Gerashchenko has withstood continual attacks on his policies during his two terms as Central Bank chairman. His 1992-94 term ended with his sacking after the ruble plunged 30 percent in a single day. He was brought back after the 1998 ruble devaluation, and his main achievement since then has been preserving the status quo, despite the Putin government's passion for reforms. He has supported the ruble, resisted all but nominal changes to the banking sector and insisted on tight currency regulations that have big business howling.
"This should have been done a long time ago," former Economics Minister Yevgeny Yasin said in televised remarks Friday. "[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."
"A new time demands new people," Alfa Bank president Pyotr Aven told NTV. "The extremely slow path of banking reforms in the country, or in fact the complete absence of them and the preservation of our inefficient banking system, has no other explanation than his inert thinking."
Ignatyev is seen as scrupulously honest but far more amenable to toeing the government line than Gerashchenko. It is unclear whether he would be able to withstand political pressure to rein in the Central Bank's independence, which Gerashchenko jealously guarded.
A native of St. Petersburg, he is a veteran government economist who served as Gerashchenko's deputy at the Central Bank in 1992-93. His main job at the Finance Ministry was shaping monetary policy with the Central Bank, and he was closely involved in drawing up banking reform legislation, the ministry said.
Finance Minister Alexei Kudrin on Friday praised his deputy as "one of the most experienced specialists in the area of government finance."
"It's a triumph for Kudrin, whose first deputy is now in charge of the Central Bank," said Duma banking committee head Alexander Shokhin on Ekho Moskvy radio. Nonetheless, "working with him would not be easy. He sticks to his views, and it is quite difficult to look for a compromise with him."
The dismissal fits in with Putin's policy over the past year of sweeping away troublesome lords who wouldn't give up their keys to the fiefdom. Rem Vyakhirev, the entrenched lord of Gazprom, also was fired just months before his term was up. Putin installed relative unknown Alexei Miller as Gazprom CEO with clear instructions to return assets stripped from the company.
Next was Railways Minister Nikolai Aksyonenko, fired in January just two months after being charged with abuse of office.
The change may also herald the kick-start of reforms at the Central Bank. "The situation seems to be like that at Gazprom. The task has been assigned," Moiseyev said. "But Ignatyev looks like Miller, and it may take him a long time to get to understand things and get them under control."
Ignatyev could get the chance to handpick his colleagues. In addition to Gerashchenko's post, the terms on six of the Central Bank's other board seats will end in September.
Audit Chamber head Sergei Stepashin was quick in applauding Gerashchenko's sacking, saying it would make the Central Bank much more open and calling Ignatyev "a splendid professional."
The Central Bank was the target of a scathing 70-page report on corruption, published in November by the Moscow Carnegie Center and co-authored by Dmitry Vasilyev, former head of the Federal Securities Commission. The report denounced the Central Bank's bloated, opaque structure, its independence from fiscal or government controls and numerous conflicts of interest. It is both banking sector regulator and owner of foreign and domestic commercial banks; both creditor and owner of borrowers; both keeper of ruble stability and indirect owner of a blocking stake in the Moscow Interbank Currency Exchange; both issuer of audit licenses and subject of audits.
Most infamously, the Central Bank routed IMF loans and $50 billion in hard currency reserves through FIMACO, an offshore vehicle of Central Bank subsidiary Eurobank, between 1993 and 1998 and into the market for short-term treasury bills (GKOs), without its auditor catching on.
Parliament is to discuss Gerashchenko's resignation no later than March 22, said Duma tax committee head Alexander Zhukov, news agencies reported.
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