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| Ulan Sarbanov |
Euromoney met Ulan Sarbanov, governor of the National Bank of the Kygyrz Republic, a few days after the revolution that swept president Askar Akayev from power. The situation and Sarbanov’s response brought Rudyard Kipling to mind: “If you can keep your head when all about you/Are losing theirs and blaming it on you”. A lot of people had lost their heads in the republic the previous week. Hundreds of young men went on a rioting and looting spree in Bishkek, as well as Osh and Jalal-Abad in the south. The International Business Council (IBC) estimates that about $100 million-worth of damage was done to shops and offices, only some of which were connected to the hated Akayev family.
Some government figures were beaten up in the excitement, including the head of the National Bank’s regional office in Jalal-Abad. The looters also carried away cash machines from banks and shopping malls.
Praise for the governor
As a new group of politicians seized power, there were calls for the replacement of the central bank governor as part of the revolutionary clean-out.
But it’s a sign of the respect in which Sarbanov is held that, amid this disorder, foreign ambassadors and investors emphasized to the government the importance of keeping him on.
David Grant, director of the IBC in Bishkek, says: “We did a survey of business confidence in the region. The Kyrgyz Republic ranked below almost every other country in the region on most indicators, except for macroeconomic and monetary stability, where it was considered the best country in the region. We have Sarbanov to thank for that.”
Sarbanov himself took rapid steps to ensure some stability. On March 24, the day the protestors stormed the White House, he feared a violent attack on the National Bank’s Bishkek headquarters, so he let all the staff go home, staying on himself with a handful of advisers and security staff.
He says: “I was trying to find out what was happening with the private banks. I discovered that all their managers, who are mainly young guys, were at their desks, on the phone, trying to take care of their clients, which impressed me.”
He met with the heads of the country’s 20 or so private banks that evening for a long night of discussions and consultations. They decided to close the financial market on Friday, and stop all international transactions. They tried to release this information to the press, but “it was difficult to get the message out,” Sarbanov says, “because the press were only interested in political statements”.
On Sunday, the National Bank opened a liquidity window for local banks. “We made clear that we would 100% cover any run on deposits,” says Sarbanov. “No commercial bank applied for support, so on Monday we decided to lift all restrictions on banking activity.”
The National Bank took measures to offer some confidence to retail depositors during the confusion, such as providing hotline numbers for each commercial bank. This was more than the new government did – the new state secretary made a big show of giving out his mobile number for any anxious foreign investors, but there’s no answer when you ring it.
Thanks to the coordinated actions of its leaders, the banking sector functioned normally the week after the revolution. It remains perhaps the most attractive sector of the Kyrgyz economy in terms of transparency and foreign investment, with several Kazakh banks active.
Sarbanov says he is used to working in crisis situations, because of the predicament that faced him when he became governor in 1999. “In my first week, I had to make the decision whether or not to bankrupt the country’s biggest bank,” he says. He decided to do so, and two of the other four biggest banks also went into insolvency in the next few months.
Dictatorship of the supervisors
Previously, the National Bank had pursued a “liberal banking policy”, giving local banks an easy run. Sarbanov said: “Now there will be a dictatorship of supervision – whatever is the law, that’s the law!” The hands-on approach didn’t always win him friends in parliament, where some deputies were also commercial bank CEOs.
Some observers believe it was these deputies who were behind the move to replace Sarbanov during the revolution. He says: “I heard there were discussions about a new governor, but I decided if I was sitting there worried about myself, it would be good grounds for dismissal. Whatever they might have done or will do, I don’t care. We will do the maximum we can to reduce uncertainty in the banking sector.”
Sarbanov says the revolution took him by surprise. “On March 11, we concluded the Paris Club agreement [under which the Republic got substantial debt forgiveness]. It was like a weight was finally lifted from us,” he says. “Now, we have a serious problem with investor confidence, even with keeping order on the streets, which no-one thought about before.”
He is worried that foreign investment might be affected by the scenes of rioting shown on TV news around the world, and by uncertainty about the new government’s economic policy. Foreign investors do have these concerns, but they are grateful at least that Sarbanov is still at his desk, keeping his head in tempestuous times.
