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. Last Updated: 07/27/2016

Cap on Ruble's Fluctuation to Be Introduced

Russia's main currency exchange, seeking to boost confidence in the ruble, announced Thursday that it will introduce a 10-percent limit on the currency's daily fluctuation against the dollar starting Jan. 1.


Commercial banks immediately denounced the move by the Moscow Interbank Currency Exchange, calling it "bureaucratic coercion" that would make hard-currency operations unprofitable.


But Vadim Yegorov, spokesman for the exchange, called it a necessary precaution to avoid destabilizing drops in the national currency's value.


"The new move obviously eliminates situations like Black Tuesday," he said, referring to the ruble's dramatic 22-percent plunge against the dollar on one day in October.


The crash led to a major restructuring of the Russian government and more restrictive trading rules at the exchange.


Mstislav Afanasyev, deputy head of the governmental Center for Economic Reform, said the new limits had been adopted to improve Russia's chances of winning a $6 billion currency-stabilization credit from the International Monetary Fund. IMF officials were unavailable for comment Thursday.


Under the new regime, whenever the change in the ruble-dollar rate reaches 10 percent in the course of a day's trade, the exchange will halt trading and inform the Central Bank, Yegorov said. In the exchange's three-year history, the daily change has exceeded 10 percent four times.


Yegorov said the new rules also will tie the amount of currency that any given bank can trade to the bank's charter capital. Details will be ironed out at a meeting of the exchange's board in January, he said.


Nikolay Dudin, chief currency dealer with Tveruniversalbank, called the measures "bureaucratic coercion" and said they would make "ruble-dollar trading very, very unprofitable.


"The new rules sharply limit the banks' access to the exchange. The dollar market stops being a market," he said, though he added that the lion's share of currency trade already happens directly among banks, bypassing the exchange.


A dealer at Menatep bank, who asked not to be named, warned that the new rules would curtail development of the hard-currency market.


"The market will not develop as dynamically next year," he said, adding that his bank would switch to dollar-yen, dollar-Deutsche mark operations.


Yegorov said the exchange's board also had decided to set up a system of collective responsibility among member banks and an insurance fund to provide security of payments. He said the amount of each bank's contribution to the fund would be defined in January.


Alexei Sitnin, spokesman for the Central Bank, which has a seat on the exchange's board, said that he had never heard about any of the new regulations.