VTB’s Soloviev Says Capital Controls Not ’End of World’Jason Corcoran and Vladimir Kuznetsov
Returning to capital controls in Russia eight years after the country lifted curbs on outflows would not be “the end of the world,” said the second in command at VTB Group, a state-owned lender hit by sanctions over Ukraine.
“If you look at most of the emerging markets, most of them do -- in India, China and Brazil -- have some sort of capital controls. Everyone is happy, lives there and invests there,” Yuri Soloviev, VTB’s first deputy president, said in an interview yesterday at a Moscow investment forum.
“Even if the central bank would consider capital controls, it’s not the end of the world,” Soloviev said.
EU sanctions over Russia’s stance on the conflict in Ukraine have blocked investors from new stock and bonds issued by VTB, Russia’s second-biggest bank, and its larger rival, OAO Sberbank. VTB, whose first-half profit plummeted, last month tapped the government to boost capital.
Russia is struggling to stanch the flow of money overseas as U.S. and EU sanctions limit the country’s access to global capital markets. Outflows are forecast to reach $100 billion this year after $61 billion left the country in 2013. If net outflows accelerate, the Bank of Russia may consider temporary, preventative controls, according to two officials with direct knowledge of deliberations at the central bank.
The ruble weakened to near a record low yesterday amid investor concern Russia may re-introduce capital controls. The currency bucked a five-day losing streak, gaining 0.2 percent against the dollar to 39.6095 by 3:50 p.m. in Moscow.
Putin and the central bank denied plans for capital controls. “We don’t plan to introduce currency restrictions of to introduce restrictions on the movement of capital,” the president said at VTB Capital’s forum today.
The Kremlin imposed curbs on the movement of capital in 1998, when the ruble’s drop led to a default on sovereign local-currency debt. It lifted the last of those restrictions eight years later. Reintroducing such measures risks further damaging Putin’s ambition of turning Moscow into a financial hub.
Speculation about controls over capital flows being re-introduced now are “baseless,” said Elvira Nabiullina, head of Russia’s central bank. She said the removal of controls on capital movement was a major achievement for Russia.
“To reject that achievement, truly, would set us back many years,” she said earlier today at the forum.