Prime Minister Vladimir Putin's presentation:

I am happy to be here and speak before a respectable audience of people who can so influence the global economy. Russia's financial and economic stability also depends to a large extent on the decisions you make because they influence your own country's financial conditions and so the rest of the world.

Therefore, we follow your every movement with undivided attention, even trying to read lips, as Ronald Reagan once said, and guess what you are planning before you even do it.

I would like to thank you all for inviting me, primarily the chairman of the Central Bank of Russia, to speak at this international conference. This conference is part of the celebration of the anniversary of the country's financial regulator - the Central Bank of Russia.

The state bank was established in Russia in 1860. It was one of the first steps of Tsar Alexander II's great reform policies, which also included the abolition of serfdom, a reorganisation of the court system, as well as military and municipal reform.

I believe that all of us - at least Russians - will go back time and again to the unique events of that era, which provided a model for the successful and harmonious modernisation of the main political and social institutions in Russia, a joint effort between the government, public associations and all social groups.

Ladies and gentlemen,

Our current subject is one that is representative of this important conference - Central Banks and Global Economic Development: New Challenges and Future Prospects.

The global economic crisis that we all have encountered has clearly shown how dependent we are on each other. It has also shown that the irresponsible or selfish actions of one country or even one large bank may cause problems for the entire global financial system, as well as for themselves.

Therefore, it is especially important that governments, financial authorities, and central banks of all countries synchronise their policies.

I can assure you, ladies and gentlemen, that Russia will always be a reliable business partner - I am emphasising the word business here. I mean that we are committed to coordinating our own steps with what's going on out there, with the decisions worked out by the G8 and G20 groups.

We expect to take part in a professional conversation today, a discussion of concerns shared by the international financial community. We would like to work out fair rules of the game that would insure the global economy and finance against ill-advised actions such as the reckless accumulation of budget deficit, virtual assets and stock market bubbles.

It is obvious that we should provide each other with comprehensive and reliable information on our current economic situations. We should cooperatively develop policies aimed at dealing with the repercussions of the crisis and at lessening the risk of another crisis in the future. We must improve audit and bank supervision practices and make rating agencies more transparent. I also consider it expedient to revise the roles of leading international financial organisations and key international agreements. I know that this approach is largely shared by the governments of leading economies, including European countries.

Russian analysts have already explained their positions on all of the issues I just mentioned. We hope that our partners will take their opinions into account in the global discussion and while making coordinated decisions.

Ladies and gentlemen,

The Russian government has a strong and long-standing tradition of constructive cooperation with the Central Bank. We discuss most strategic issues together and make cooperative decisions; we also combine efforts in drafting a single policy for financial, credit and monetary issues.

At the same time, just like most monetary regulators in other countries, Russia's Central Bank has a special status. The Russian constitution and a special federal law ensure the Central Bank's independence in making currency issue decisions and adopting policies to stabilise the rouble. I can assure you that the Central Bank enjoys absolute independence within the sphere of its authority.

Speaking of division of functions, I would like to discuss several issues in banking and finance policy here.

I am sure that the people's confidence in their government's policy is key to overcoming financial and economic problems. Confidence is absolutely essential. Unfortunately, Russia's record includes defaults, a banking panic and the flight from the rouble.

However, the situation has changed dramatically, which was perfectly demonstrated by how the Russian economy weathered last year's crisis. The Russian people do have confidence in their national currency now. They know they are using a genuine, dependable currency. A stable and convertible rouble gives Russians obvious material advantages as well as more self-respect, if I might say so. Also, people have justified confidence in their banking system. Most of the credit for these improvements must be given to the Central Bank.

First of all, it has wisely accumulated gold and currency reserves during periods of steady economic growth. These reserves are more than enough to protect the rouble from global economic shocks. The Central Bank has resumed its reserve accumulation policy in the past few months, and Russia's gold and currency reserves are among the largest in the world.

Secondly, we protected the economy by creating a deposit insurance system, and put up barriers against crime and "dirty money." In this regard, ladies and gentlemen, I would like us all to honour the memory of Andrei Kozlov, the deputy chairman of the Central Bank who was murdered. He was the one to lead the challenging work of decriminalising the country's banking sector, and he was able to achieve some real results.

Special policies were adopted to keep the banking system stable during the recession. I am referring to the lowered required reserve, unsecured lending, various forms of increasing capital, increased deposit insurance compensation, and innovative rehabilitation policies for insolvent lenders. We have fully realised that some of these policies, for example unsecured lending, involved high risks.

But we were also cautious. The Central Bank was careful. In fact, each step was adjusted and readjusted to real life conditions and the current economic situation before the next step was taken.

I can tell you now with certainty that all of the steps taken have worked, promptly and effectively. It was thanks to these policies that Russia went through the crisis quickly and returned to economic growth.

Now I would like to say a few words about what we need to do next.

The current monetary policy should be aimed at a stable and healthy economic growth. Therefore, the most important strategic goal is to gradually reduce inflation. This is our key objective for the next three years - that inflation does not exceed 5%-7%. Further on, it should be lowered even more. This year's inflation is expected to be at 6%-7%, and it should be no higher than 6.5% in 2011.

The economic expediency of suppressing inflation must be obvious, especially to such a professional audience. There is little I can add here, except that the level of inflation is a measurement of the performance of the Central Bank, in any country.

Yet, we are not trying to shift full responsibility to the Central Bank. The government will also make efforts to slow down rising prices: for example, by keeping down the fees the so-called infrastructure monopolies charge for their services and by creating a competitive environment.

Another major goal is making loans available and affordable to the non-financial sectors of the economy, which need lower rates and longer terms.

We are certainly not asking banks to issue loans to anyone, without considering the risks and the borrower's financial status. Yet, we believe that the current situation is favourable for increasing loan portfolios. The Central Bank is gradually cutting its refinance rate, which has reached a historic low of 7.75%, the lowest that post-Soviet Russia has seen. And the annual rate of inflation has dropped to 6%.

We have made another decision to provide additional assistance to the banks to strengthen their resource bases. This decision is not crucial for those attending the conference but it is significant for the national banking system, and I hope for the real economy as well. Both the Russian government and the Central Bank have made the decision to decrease rates on subordinate loans received by banks through the government's backup resources. Currently, the subordinate loan rate is 8%-9.5% and it will be lowered to 6.5%-7.5%.

The rate of 6.5% will be established for Russia's Sberbank, VTB Bank, Rosselkhozbank and the commercial banks that have received subordinate loans through the ‘one to one' programme, which means that for each rouble loaned, one rouble is provided from their own resources.

The rate of 7.5% will be established for banks that have joined the ‘one to three' programme, which brings three roubles from the Central Bank or the government's subordinate loan for each rouble of their own resources.

In 2009, the growth of loans for the real sector, or the loan portfolio - I will speak on this further - stood at 40% of the gross domestic product. Yet overall, it has indicated no growth and has remained at the 2008 level. We expect that today's decisions on lowering rates on subordinate loans will facilitate raising the loan portfolio to be used by the national economy's real sector.

I would like to emphasize that it is unreasonable to solely increase lending without considering the macroeconomic effects of this as it may lead to serious problems. The Central Bank should find the optimal balance between the goals of lowering inflation, securing economic growth and handling systemic risks related to excessive debt burden on the economy as a whole.

The next task is a sustainable development of the national banking system which has indicated obvious growth in the past few years. In 2009, when the crisis was in full effect, the lending volumes for the real economy and population reached over 40% of the gross domestic product. Still, this growth rate kept at the 2008 levels. In total, people are keeping 7.8 trillion roubles in their bank accounts, and these savings are steadily increasing.

Yet, the banks' activities and the quality of services they offer are a far cry from the Russian economy's actual needs. For obvious reason, many Russian borrowers turned to foreign creditors during the pre-crisis period and they continue to do so even now, though it is well known that this is potentially risky and may result in excessive foreign debts.

This is why I believe that we should seek resources to raise national banks' capitalisation. I am not speaking of state reserves but of increasing the banks' own assets and their owners' investments. We continually urge our financial institutions and banks to undertake such efforts.

We have to increase the accessibility of banking services for the greatest number of citizens, and modern informational technologies will help achieve this. There is a need for diversification within the banking sector, as the current situation is dominated by major banks with considerable shares of state capital.

In the future, we expect that a greater number of private banks will provide clients with competitive services. Strong regional banks that work with small and medium-sized businesses have good prospects as well.

Here, I should mention the position of Central Bank Chairman Sergei Ignatyev, who has pursued the consistent policy of supporting regional banks. Mr Ignatyev sticks to the opinion that medium-sized regional banks are closer to clients as they have a better grasp of their problems and work more promptly and efficiently. He consistently advocates this viewpoint, sometimes even in debates over the issue with colleagues and ministers responsible for the economic issues in the government. I believe he is right.

We should also put more effort into introducing up-to-date systems of banking supervision and risk management which are free from excessive control but able to promptly determine risks for the stability of lending agencies.

Similar to the real sector of the economy, lending institutions should work to increase the labour productivity of their personnel. Here, a regulator plays a major role. The Russian government has been working on a complete revision of our controlling and supervising bodies, but this has not been completed yet. We have made a decision to reduce or fully eliminate many unnecessary and expensive procedures.

I think that the Central Bank could do something similar: make a thorough assessment within the professional community and decide which accounting forms, instructions and excessive requirements for banking offices could be eliminated without detriment to their operation.

Currently, specialists at the Central Bank and the Ministry of Finance are developing the strategy for developing Russia's banking sector through 2015. I hope all these issues will be incorporated in the strategy and will be implemented in the future.

Ladies and gentlemen, colleagues,

In conclusion, I would like to cordially join in on the congratulations for the Central Bank personnel and veterans - both those that have been voiced today and those still to come.

With its professionalism and vast experience, the Central Bank team enjoys well-deserved respect both in Russia and abroad. This is proved by its large and representative delegation at today's forum.

I wish you efficient work and I would like to thank you for coming to Moscow to attend the forum.

Thank you for your attention.