Indeed, we have committed to ceasing currency market intervention to support the Ruble. However, from a broader perspective, the instrumental role of interventions appears more complex, which is clearly demonstrated by global markets. Essentially, this proof is characteristic of the emerging paradigm in the reserve currencies system, bound to directly affect the global standing of the Ruble and our policy instruments.

Over the past 20-30 years, developing global finance has formed a new international monetary system and a new reserve currencies structure. Until recently, we used to define reserve currencies as the most convenient for central banks to keep their trade payment reserves in. This paradigm has shifted long ago. Today, reserve currency denotes the currency of a nation with sufficient financial market depth, traditionally used throughout the world to nominate financial assets.

Those who have been closely following central bank policies across the globe will have noted that even in so-called ‘reserve currency’ countries, central banks have resorted to interventions in recent years. One of the instruments used in such interventions is the Federal Reserve swap. A couple of years ago, in a new outbreak of crisis, the European Central Bank made a swap with the FRS and lent dollars to local banks.

Today’s global finance is structured as a cluster of currency markets. Some are global currencies, others are region-specific. The borders of these markets overlap national borders.

This situation gives rise to the lender of last resort problem in other nations’ currency markets. For instance, if the lender of last resort problem arises in the USD market for European banks, the role is assumed by the European Central Bank through swaps with the FRS.

On the one hand, we see developing national financial asset markets, on the other – developing global foreign currency markets. Hence, for financial stability purposes, the use of this type of instruments will continue.

The Ruble is de facto a reserve currency, at least to a certain extent. As it happens, many of our neighboring countries pursue a fixed currency rate policy with the Russian Ruble as part of their currency basket, effectively making the Ruble a reserve currency. Some countries nominate their assets in Rubles. Therefore, the Ruble is becoming a reserve currency in a more contemporary sense – as a currency used for nominating foreign instruments.

We cannot predict the exact course of the global financial system. Will we see an expansion of international agreements? Or will countries rely mainly on their own reserve assets, as they have until now? In any case, it is completely obvious that financial stability still calls for central banks’ currency intervention, and we reserve the right to develop and employ such instruments for the time being.

There is much to be done, however, if we strive to build up the role of the Ruble as a reserve currency. This hinges on the development of financial market instruments and financial infrastructure in general. Stifling inflation is essential for creating a reserve currency: high inflation destroys the currency’s appeal for nominating assets. All reserve currencies have a floating rate (with the exception of the Chinese Yuan).

Finally, can a reserve currency exist in a resource-based economy? And what should the economic policy be in this case? These questions also require a responsible answer. For instance, Australia and Canada are two countries with reserve currencies, a floating rate, stable economies and low inflation. I think this combination of parameters is our best choice.

28.11.2014 15:03 / Elvira Nabiullina

OUR POLICY GOALS MUST BE CLEAR A little over a year ago, the Bank of Russia became megaregulator, spreading its control and oversight functions to other financial market segments besides banking. It’s a mass of work, tens of thousands companies: 572 in insurance, 1790 in collective investment, almost 4.5 thousand in microfinance, some 8 thousand pawn shops et cetera. Compare this with a mere 842 companies in banking services, 790 of which are banks.

29.04.2014 15:56 / Denis Spirin

The Ideal Model: Why We Need the New Corporate Code The new Corporate Governance Code, passed by the Government and Russia’s financial market megaregulator, the Bank of Russia, deserves to be the news of the day. Sceptics may object that the Code is merely a recommendation, and the best practice of corporate governance contained therein is detached from reality.

09.04.2014 14:06 / Anatoly Karachinsky

IDENTIFYING PERFORMANCE RESERVES OF FINANCIAL MARKETS Russia’s financial market produces a staggering billion-plus paper documents yearly. Every individual has to open a bank account, buy insurance, pay fines, taxes, and housing bills. Most people do it by signing papers and wasting time in queues. Most companies have to keep paper copies of their official reports and electronic transactions.

25.02.2014 13:30 / Anna Kuznetsova

New listing rules will boost transparency, strengthen corporate governance Moscow Exchange is currently reforming its listing rules, a process that will strengthen the market for both issuers of stocks and bonds, while providing domestic investors with an opportunity to diversify their investment portfolios.

28.01.2014 15:10 / Ksenia Yudaeva

Reserve Currencies and the Role of the Ruble The Bank of Russia policy focus has shifted to inflation targeting, sparking a debate on intervention practice and prompting us to reconsider the prospects of the Ruble as a reserve currency.

14.10.2013 13:35 / Alexei Kuznetsov

Taxes and Russian IFC’s Competitive Edge Taxation should not hinder financial market development. This is the motto of MIFC Taskforce’s Tax Project Group that drafts tax reform proposals.

02.10.2013 12:00 / Sergei Shvetsov

The Regulator Needs to Hear the Market A month has passed since the financial markets megaregulator was established. We have solved the key task for the transitional period of FFMS-Bank of Russia merger — maintaining continuity of service, essential for the functioning of the market. We have now initiated systematic analysis of current affairs — from the regulation, control and oversight perspective — in each financial market segment.

11.09.2013 13:45 / Alexander Voloshin

Reforms that benefit the market More than three years have elapsed since Moscow International Financial Center Taskforce was established. We have managed to achieve various degrees of progress in all key performance areas of Moscow’s development as an international financial center.

11.09.2013 12:15 / Igor Jurgens

Self-regulation is balancing rights and responsibility The adopted financial market self-regulation law and the implementation of related practices is an evolutionary step for production forces, to borrow a scientific term. From a common perspective, self-regulation is an absolute must, with the increasing importance of roles played by civil society and the business community. The pendulum has swung from unchecked democracy of the early 90’s to equal partnership of the 00’s to state supremacy. The pendulum must be kept on track: the state is unfit to handle all regulatory functions without considering the interests and healthy intentions of the business community.

11.09.2013 11:59 / Oleg Vyugin

On megaregulator priorities The key starting objective for the new regulator is to reconsider the paradigm of financial regulation based on the prospective advantages of the ongoing megaregulator project. We must aim to minimize the negative impact of structural overhaul of the regulation system.

11.09.2013 11:45 / Alexey Timofeev

The market anticipates Central Bank’s attention to business specifics The establishment of a Central Bank-based megaregulator is a pivotal change in the entire financial market regulation and oversight system. The reform is one of the key phases of system development. An outstanding contribution to the financial market has been made by the Central Bank predecessors – FFMS, FCSM, Minfin, the Russian Insurance Supervision Service and the Labor Ministry, and it would be inappropriate to call the new reform a clean-up of their failed attempts. Using failures as a pretext to delegate financial market regulation functions means going back to square one, a way to justify any regulatory measures that would appear an improvement by mere contrast. This is misleading, since the financial market that has taken shape in Russia is far from its nascent stage.