According to many economists, the relevance of this issue is determined by the fact that, it is an important factor for the successful market economy development. The efficiency of any country's economy is due to the stability of the national currency, low inflation, the reliability of the banking system and etc.

The central bank (CB) is the controller of monetary and banking system. One of the most actively discussed issues in world economic theory and practice for a long time is how the independence of monetary authorities contributes to the achievement of these goals.

The independence of CB established by law or formed during the historical development of a particular country, allows it to be free from political conditions and maintain the stability of the national currency by choosing the most effective tools of monetary regulation.

In spite of the CB’s legal position determining its formal independence in real life the interaction between public authorities and the central bank is different. A lot of laws forming the CB’s rights and obligations are imperfect and can be interpreted arbitrarily. That’s why the real level of CB’s independence depends on such factors as traditions, personal qualities of the manager and other employees of CB. For example, in Argentina the time for a chairman to manage the CB is determined by the law. But at the same time, there is a tradition that a chairman retires in case of changing government or minister of finance.

In other cases, authorized capital of CB can belong to private organizations. These issuing institutes are called quasi-government financial and credit ones in foreign economic literature. There are two types of them; ones that were created as private joint stock companies and exists on this basis now (United States Federal Reserve, The bank of Italy) and “mixed” institutes which have such co-founders as local authorities, commercial banks and etc. Another examples of “mixed” institutes are the bank of Austria (50% belongs to the government), The Swiss national bank (58,6% – to cantons, 41,4% – to person or entity).

However, the form of organization for the most CB is public institution which has 100% of stocks (Great Britain, Austria, Germany, Russia, Sweden, Finland and Spain.) It is worth mentioning that, any issuing institution remains an independent entity, has its own account and balance sheet.

The structure of CB’s profit distribution is diverse. However they all have to give a large share of the profits to the government. For example the Austrian national bank transfers to the budget 30% from received gross income and 42% from gross profit goes as dividends to the main shareholder – to the government. The net profit of the Bank of England’s issuing department has to be fully transferred to the treasury and the profit of the banking department to the budget after contribution to funds and payment of corporate income tax. Besides, the state also strictly regulates the CB’s work and its costs. Normally issuing institutions set up costs of their estimates which are to be approved by legislative and executive authorities. For example the cost estimate of United States Federal Reserves is established by US Congress; the cost estimate created by the General Council of the Bank of France is subjected to approval by the Government of France. The Bundesrechnungshof controls the Federal German Bank. That’s why we can say that the CB doesn’t have real freedom of actions and independence. It’s just a tool which helps the government to get income in the form of seigniorage. The government needs to cover the cost.

Nowadays in Russia the growth of GPD is slow and the inflation is paused; it causes the contradictions in the issue of the entering the Ministry of Economy and Development into the territory of independence of the CB’s monetary police. So it was necessary to find a way how to support the economy and issues of inflation targeting.

In 2019 the Ministry of Economy and Development offered to add legal commission for economic development new powers – to manage aggregate demand. During the forum “Russia is calling!” the head of the department Maxim Oreshkin said that in the present circumstances aggregate demand is not comply with potential level, as in 2019 inflation will be closer to 3%. This result does not comply with the expectations from CB and the Ministry of Economy and Development. This indicates that a certain volume of aggregate demand was not received, including income of the population, companies and budget’s profit. According to the Ministry of Economy and Development’s financial evaluation and the calculations this year shortage is more than 1 trillion rubles.

Based on data from information and analytical centre “Alpari” Russian CB is going to low key rate and in December it might be at the level 6,25% per year and the next year may drop to 5%. The assistant of RF president – Andrey Belousov has such thoughts. Also he supposes that it is not a good idea to lower the rate too fast because it will lead to speculative expectations and expectations of instability. The lowering of key rate always causes the risk of ruble’s collapsing which will require increased coordination between the CB and the Ministry of Finance.

At the end of meeting on October 25th Board of Directors of the CB lowered the key rate by 0,5 percentage point to 6,5% per year. The head of the Ministry of Economy and Development Maxim Oreshkin said that it would be necessary to do earlier and this decision could result the increase of lending and spur economic growth.

In this point the Russian CB was against of consolidation the aggregate management functions for the commission as it sees this as threat to its independence and also a risk of growing distrust to the monetary policy. This reply was written in a response letter from the Bank of Russia dated November, 26th.

The CB thinks that creation of such organization with such functions will be regarded as the state’s willingness to manage the aggregate demand by ensuring the necessary economic growth rates with a risk to long-term price stability. Regulator warned that this may lead to the lowering the CB’s independence, inflation targeting trust, increase in interest rates and later increase interest rates.

Explaining its position the CB reminded that independent OST (aimed at maintaining price stability) is the main tool for provision aggregate demand on the relevant potential of the economy level. People who have connection with economic have to be confident that the impact on aggregate demand by measures of OST is limited by the tasks of counter-cyclical policy and the goal of keeping inflation at the target.

From the letter of regulator we can also see that the Russian CB is ready to participate in the work of the legal commission and sub-commission only with the exclusion of provision on “coordination of state policy on managing aggregate demand.”

The new tasks of the legal commission in the field of enquiring economic growth will be (according to the published version of the draft resolution):

  1. a) formation of conclusions about current economic situation;
  2. b) coordination of macroeconomic policies;
  3. c) monitoring and controlling the progress of structural reform’s realization.

Another news was adoption of the law by the state Duma according to which in 2020-2022 the Bank of Russia must transform incomes from the participation in the capital of Sberbank directly into budget.

The law was submitted into the state Duma with the project of federal budget by the government of RF for 2020 and 2021-2022 planning period. Dividend income from the CB will be 217 million rubles in 2020, 254 million rubles – in 2021 and 282 million – in 2020.

The income of the CB from Sberbank has been transferred since 2017. However, it’s necessary to modify laws every time. In new law there is a rule that procedure for transferring dividends to the budged is established for three years. The CB was against this rule, thinking that it can take away its independence by depriving of its right to dispose of its property. Income from the years 2020-2022 for the participation of the CB in the capital of Sberbank will have to be transferred into budged until August, 1st, 2020, August, 1st, 2021 and August, 1st, 2022.

Evelina Nabiullina, the head of the CB, said earlier that it’s necessary to come back to the practice of income accounting from Sberbank’s capital participation in CB, rather than transferring revenues directly to the federal budget.

Despite of the rights to choose the methods and tools for achieving the monetary policy goals, the CB is not independent and free in activity according to the requirements of the law and regulatory legal acts, the possibility of state financial control. That’s why the CB has to be in economic environment, as it has to maximize seigniorage and prevent the upsetting of the monetary economy.

The need of the CB’s independence is caused by its role in the life of the country. The state governs the economic and financial development of the country, and this management cannot always be successful and thoughtful. So that, for example, the government does not want to cover the budget deficit with an additional issue of unsecured money, the state agency in charge of the printing press has been removed from its subordination. Or if the state makes debts, then it will deal with creditors. The Law “On the Russian CB” explicitly states: “The state is not responsible for the obligations of the Bank of Russia, and the Bank of Russia – for the obligations of the state ...”.


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