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Megaregulator Takes Over

02.09.2013 21:18 / vedomosti.ru

As of yesterday, financial market oversight in its entirety has been transferred to the megaregulator – the Central Bank, with FFMS officially defunct. FFMS functions have been delegated to the Bank of Russia Financial Markets Service (SBRF), headed by the megaregulator’s First Deputy Chairman Sergey Shvetsov. FFMS still exists and will be liquidated by the year-end, according to President Putin’s orders.

Ex-Head of FFMS Vladimir Pankin is not the only person who declined to join the new regulator (he announced his decision in August). Deputy Head Sergey Kharlamov, in charge of collective investment and licensed financial market participants regulation, followed suit, as confirmed by an ex-FFMS staffer, a federal official close to FFMS and a former FFMS counterparty. Kharlamov was unavailable for comment yesterday. FFMS liquidator and Deputy Head Julia Bondareva declined to comment the changes in personnel. Shvetsov said earlier that he expects all six Pankin’s deputies to join the new Service.

Today, FFMS clients will be regulated in a more bank-like manner, states Partner at Goltsblat BLP Oleg Hokhlov.

Investment and brokerage industries are going through the most difficult times now, points out Aton General Director Andrey Zvezdochkin, key SBRF expectations revolve around decisions that have been debated for years – attracting individual investors to the stock market and lower interest rates. The main risk for market participants is how effective the integrated authority will be, says Uralsib CEO Yuri Belonoshenko: amending fund rules, share prospectus registration, processing of reports. Belonoshenko also hints at the potential conflict of interests: the CB is a Moscow Exchange shareholder, taking part in market trading. He sees a consolidated approach to regulating different types of financial companies as the strong side of the megaregulator.

One month prior to resignation, Pankin warned that “the most important and sensitive” area is non-state pension funds. “Share pension funds regulation approach is expected to be similar to banks”, Deputy Finance Minister Alexey Moiseev said earlier. NPFs will use a savings guarantee system similar to bank deposit insurance. Instead, the regulator will require funds to be more transparent and controllable, including legal status.

Megaregulator upsides, according to Belonoshenko, are a common approach to various financial companies regulation. Uralsib CEO Sirma Gotovaz agrees: “As a result, the really reliable companies with enough reserves and capital will stay on the market”. In 2012, the number of insurance companies in Russia went down from 530 to 457, with 20 majors accounting for over 70% of the market.

First Deputy CEO at Sogaz Nokloay Galushin expects the new regulator to change the oversight process: not reacting to problems as they arise with insurers, but preventing them. Control over mandatory insurance must become particularly strict, he stresses.

One of the reasons for creating the megaregulator is a steep rise in microfinance. FFMS lacked the resources, points out NAUMIR President Mikhail Mamuta. He expects the megaregulator to provide better control, since some 5-7% microfinance companies today attempt to circumvent the law. Possible synchronized decisions for microfinance and banking raise concern, because risks differ, warns Mamuta.

Tatiana Botchkareva, Yulia Orlova

Financial markets megaregulatorProject Group №1Sergei Shvetsov