Guy Norton in Moscow -
Cometh the hour, cometh the man. Having previously spent five years at the helm of the National Bank of Kazakhstan from 1999-2004, Grigory Marchenko returned to head the country's central bank at the end of January 2009 and restore confidence to a sector that had been brought to its knees by the global financial crisis
It's been a dramatic, not to say traumatic, 15 months or so for the banking sector in Kazakhstan. A toxic combination of overweaning ambition and often fraudulent mismanagement led to debt defaults, and then lengthy horse trading over the details of subsequent restructuring plus a controversial - in some quarters at least - devaluation all added to a sense of fear and loathing towards Kazakhstan's banking sector among lenders, investors and depositors.
What for most of the past decade was regarded as the best managed and best regulated financial sector in the former Soviet Union - always something of a backhanded compliment at the best of times - suddenly underwent a dramatic reversal of fortune in 2009, with investors and depositors heading for the exit at a rate of knots and the authorities in Astana forced to step in with a multi-billion-dollar rescue package to shore up tattered balance sheets and prevent a wholesale run of the country's banks, which could have sparked the type of political and social unrest that recently shook neighbouring Kyrgyzstan to its very foundations.
But after the dark days of early 2009 when the government bailouts and the 18% devaluation of the tenge were followed in short succession by news of massive defaults and restructurings, the once seemingly critical situation in Central Asia's most developed banking sector has been stabilized by what has ultimately proved to be effective, if at times bitter, medicine.
That medecine has been administered by Grigory Marchenko, who directed a number of well planned measures that in the interim period have successfully restored depositors faith in Kazakhstan's financial sector and further embellished Marchenko's already glowing reputation as a safe and sure guardian of Kazakhstan's economic future. It's no surprise then that the man once dubbed the "Alan Greenspan of the Commonwealth of Independent States" - when comparisons with the former head of the US Federal Reserve System ranked as high praise indeed - is in expansive mood when he enumerates the positives of what was once a highly negative situation in the banking sector and which threatened to overshadow the transformation of Kazakhstan's economy in the course of the noughties, much of which was masterminded by Marchenko himself.
By the end of the summer when the debt restructuring at BTA, Kazakhstan's one-time banking market leader, should be finally completed, Marchenko says that there should be a comprehensive reevaluation of the business prospects of the sector in the light of the measures he has helped to oversee. "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 over-appreciation of the Kazakh tenge.
Marchenko is openly dismissive of those observers who claimed that the 18% devaluation of the tenge he undertook just days after he returned to the central bank was too little, too late. "There was an overly emotional reaction to the devaluation," he says, adding: "When things change dramatically there are always people looking for someone to blame."
He says the tenge's quick stabilisation around the envisaged KZT150/USD 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 as if he takes much notice of the barbs aimed at him in the press. "The media thrives on controversy and negative criticism," he claims, adding that 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," he notes.
Not beyond criticism
Marchenko's equally dismissive of criticisms of the punitive actions he took against those foreign exchange bureaus in Kazakhstan that had 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 says, adding 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."
While Marchenko is personally and professionally satisfied that the measures he has undertaken since 2009 have to a great extent restored people's faith in the regulation and management of the Kazakh banking system, he's pragmatic enough to accept that he is not beyond criticism. "100% credibility is never possible, but the central bank does enjoy the faith of our own population and of the financial community in general," he says.
With the battle to save the country's banks from the threat bankruptcy all over bar the shouting, Marchenko is confident that better times lie ahead, predicting 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," he says.
While there's no doubt Marchenko regrets that he had to be called back to the central bank to clear up other people's mess, there's also an undoubted quiet sense of satisfaction that he's done more than enough to justify his position and that of the National Bank of Kazakhstan.
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