Late last Saturday, the State Duma registered a bill “On Amendments to the Laws of the Russian Federation (in relation to the Central Bank of Russia assuming financial markets regulation, control and oversight functions)”. Yesterday the bill was delivered to the Duma Financial Market Committee.

296 pages of the bill include a comprehensive package of financial markets megaregulator amendments. The project was already published on the Minfin website in early March. Making a back-to-back comparison of the two versions is a difficult task – a month prior to Duma introduction the draft was significantly expanded, with part of the original terms replaced by more concise, and at times general. At any rate, the bill is due to be carefully reviewed by all market participants — planned amendments to the key CB regulation laws is a brilliant opportunity for changing any legal norm under the pretext of law improvement. It is worth noting that the megaregulator act story highlights the complicated process of passing an important law today. For instance, recommended timeframes would not have been met for the analysis of regulatory impact of the act on business. The cost of quality legal analysis of the draft bill as part of the month-long anticorruption check would have been far too great to expect truly independent opinions. Existing ‘public debate’ technologies are blatantly primitive and fake for bills of such importance. Finally, Open Government mechanisms do not appear highly effective to handle a reform of this magnitude either.

One of the key points of the draft bill is the de facto revision of the Bank of Russia mandate, inevitable due to the CB receiving government control functions in the financial markets. The new Central Bank Act, Article 45.1, reads: “The Bank of Russia, in liaison with the Government of the Russian Federation, drafts the Russian financial market development and stability policy” — thus admitting the leading role of the Central Bank in maintaining the stability of the entire financial system, at least in legal terms: the government merely assists the Bank of Russia to seek stability measures, which will be ultimately approved by none other than the Bank of Russia. Note that judging by the wording of the bill, this is not a figure of speech: the final draft contains many amendments geared to effectively make the CB a “monopoly keeper of financial stability”. For instance, to perform financial oversight, the CB is vested with the right to “request from banks information pertaining to transactions, accounts and deposits, as well as client and third party trades and other information necessary for the performance of oversight (control) functions”. Thus the de facto absence of banking secrecy for the regulator is now transformed into legal right to obtain any info on any financial market transactions (FFMS has no authority of that kind today), and the rules of access to information are also left to the CB.

Still, even if the bill receives a harsh welcome from the State Duma (this is a possibility, since the lower house is traditionally at odds with the Bank of Russia, of all state authorities), the Government is inclined to consider the financial megaregulator debate over and done with. The project is due to be enforced on 1 August 2013, leaving no room for Duma to hesitate with adoption, and launch preparations are in full swing — but are mostly limited to “the bare necessities”. A key issue was FFMS salaries, which are below the Central Bank level. Some sources estimate the average Central Bank salary at some RUB 90k, versus RUB 35k at the FFMS. Megaregulator session briefs state RUB 58k for FFMS and RUB 86k for the CB. FFMS has called for their salaries to match the Bank of Russia headquarters level, not the Main Directorate, where salaries are 10% less on average. Nevertheless, the decision to adjust FFMS salaries 1.8 times was passed. Details will be finalized soon: the inter-ministerial megaregulator workgroup chaired by Finance Minister Anton Siluanov meets on 5 April.

Tatiana Grishina, Dmitry Butrin

Financial markets megaregulator, Project Group №1