Bank of Russia in war and peace

How central banking in Russia is coping with war and other political expediencies

Central banks were created (or evolved or transformed) as a class of institutions to smoothen monetary management, including the internal and external value of the currency and oversight over specific financial markets and institutions. Almost without exception, they had their origins in a war or financial crisis or calls to prevent one. Their functions have evolved over the years in keeping with the challenges and priorities of the day. They have to provide funds and liquidity without being taken for granted as providers with no resort. Be the lender of last resort but not be seen as always there whenever and whatever. Be independent of the government but not too distant an independence for the comfort of the ruling dispensation.

Different central banks have charted distinct courses in their evolution. In this, the central banks of erstwhile communist regimes are strikingly different. Within that, the Bank of Russia has been unique. Starting in the feudal Tsarist Russia of 1860, the State Bank of the Russian Empire evolved with the many phases of its existence: the revolution of 1905, the first world war, the October revolution, the second world war, the cold war, glasnost and perestroika, and continuing run-ins with western capitalist regimes. Over the years, the Bank of Russia evolved to become a body of professional central bankers, drawing far greater respect than their political counterparts.

In the context of this chequered history, I examine how the Bank of Russia and Governor Elvira Nabiullina are coping with the current challenges. While meeting the day's requirements, they also need to be seen as retaining central banking independence and sticking to monetary and financial stability and economic growth objectives.