Marchenko defends his record

02/05/2010 | Guy Norton

The Kazakh banking sector is emerging from its crisis and institutions’ financial indicators are set to improve, Kazakhstan’s central bank governor Grigory Marchenko said in an interview this weekend

The Kazakh banking sector is emerging from its crisis and institutions’ financial indicators are set to improve, Grigory Marchenko, Governor of the National Bank of Kazakhstan said this weekend.

In an interview with Emerging Markets, Marchenko also mounted a robust defence of the decision last year to devalue the tenge.

With the restructuring of the bankrupt Alliance Bank complete, and that of Bank Turan Alem well underway, Marchenko argued that the measures taken since he returned to the national bank in February last year have largely restored people’s faith in banking regulation and management.

“One hundred per cent credibility is never possible, but the central bank does enjoy the faith of our own population and of the financial community in general,” he said.

Marchenko predicted that forthcoming financial indicators for the sector are likely to show a distinct improvement versus last year. “If the data for the first half of the year are good, that will prove we are on the right path.”

Marchenko was reappointed in February last year to the job he held in 1999-2004, and oversaw an 18% devaluation of the tenge days afterwards. He is openly dismissive of those observers who claimed that the adjustment was too little, too late.

“In January 2009 there was a massive flight out of the currency,” says Marchenko, adding that in recent months the central bank has had to intervene forcefully to avoid any overappreciation of the Kazakh tenge.

“There was an overly emotional reaction to the devaluation. When things change dramatically there are always people looking for someone to blame.”

He says that the fact that the tenge quickly stabilized around the envisaged Kzt150/$ mark, made a nonsense of claims that the devaluation would rapidly be followed by another one. “I follow the Dilbert principle that most people when they act outside the sphere of their professional responsibilities act like idiots.”

Marchenko adds that while many commentators felt free to make statements about the devaluation, none of them bore any responsibility for them. “They don’t run the National Bank of Kazakhstan. I do.”

Marchenko is enough of a realist however to accept that his high profile position as a central bank governor inevitably attracts its share of criticism, fair or otherwise. “It’s part and parcel of the job description to be criticized heavily.”

Furthermore it’s not that he takes much notice of the barbs aimed at him in the press. “The media thrives on controversy and negative criticism,” he claims, adding: “Being the central bank governor is not about being popular with the tabloid press.”

Moreover, the overwhelming majority of expert opinion was fully aligned with the timing and scale of the devaluation. “Some 99% of people who know anything about economics supported the devaluation we undertook.”

Marchenko is equally dismissive of criticisms of the punitive actions he took against those foreign exchange bureaus in Kazakhstan which conspired to spread rumours about a further possible devaluation of the tenge.

“Those foreign exchange bureaus which misbehaved were punished, those which didn’t were allowed to continue to operate.” He adds that there was never any intention to limit free and fair competition on the foreign exchange front.

“We don’t generally want to be prohibitive in our actions, we want there to be healthy competition between the banks, the foreign exchange bureaus and the post office in Kazakhstan.”

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