Russian banking sector ready for curtailment of U.S. quantitative easing - Central Bank
SOCHI. Sept 6 (Interfax) - The Russian banking sector is sufficiently ready for the U.S. to curtail its quantitative easing program, Deputy Director of the Russian Central Bank's Financial Stability Department Sergei Moiseyev said during a banking forum in Sochi organized by the Association of Regional Banks of Russia.
"With regards to Russia, to our readiness for the curtailment of the quantitative easing program in the U.S., which by all appearances might begin in the fourth quarter of this year and possibly be fully realized in 2014, I assess our readiness as rather high," he said.
However, the Central Bank official said the completion of the QE3 program, which aims to provide cheap liquidity via purchases of $85 billion in sovereign bonds and mortgage-backed securities every month, will be one of the main external shocks for the banking sector in the near future.
"If the Federal Reserve does this too hastily or even not hastily, and purchases are reduced in a natural way, this curtailment means, if we look at Indonesia and Brazil, a reverse movement of capital from these markets, it means devaluation of national currencies, and right now we're observing these signs in countries that are comparable to Russia," Moiseyev said.
The Central Bank official explained his confidence that Russia is sufficiently ready for this shock by noting the current situation in comparison with other countries and market reactions to the first statements that quantitative easing is being curtailed.
"[Federal Reserve Chairman Ben] Bernanke already announced this back in June, after which there was an immediate reaction. If you make a comparison with our market, growth in interest rates was approximately 150-200 basis points depending on duration. We observed a slight depreciation of the ruble, but in general all of this looks a lot more stable in comparison with other countries," Moiseyev said.
In mid-June, Bernanke announced for the first time that the quantitative easing program is likely to be curtailed by the middle of next year. His statement caused the stock markets in emerging markets, particularly Russia, to drop.
The Central Bank performed a stress test that demonstrated "quite moderate" results, Moiseyev said. The Russian market will need to further adapt only in the case of "the longer term with a worse scenario; for example, a decrease in the oil price to below $100 or $70 per barrel," he said.
