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NAUFOR Asks Shuvalov to Retain Two Financial Market Regulators

15.10.2012 17:34 / Interfax

National Stock Market Participants Association (NAUFOR) has forwarded a statement to First Deputy Prime Minister Igor Shuvalov and Presidential Aide Elvira Nabiullina on the proposed delegation of regulation and oversight of all financial institutions to the Central Bank of Russia.

In early October President Putin stated that the controversial concept of unified Central Bank-based financial regulation should be debated with experts, and decisions must follow as soon as possible. "The government proposes FFMS unification with Central Bank. The idea has its followers, and opponents as well. I suggest that the banking and investment communities and all interested parties join in the debate", said Putin.

According to the NAUFOR statement, the principle of Russian financial market regulation should be "twin peaks", with two closely cooperating regulators. One will maintain financial stability, acting as prudential regulator of key financial institutions, while the other upholds fair play in the markets, protecting investor and customer rights.

NAUFOR experts` opinion is that Federal Financial Market Service (FFMS) must retain non-banking regulation and control, and the status of this authority must be fortified by giving it back functions formerly delegated to the Ministry of Finance.

In 2011 FFMS regulatory powers suffered when key legislative functions were delegated to Minfin. "This was a mistake that complicated regulation and essentially blocked it by stripping FFMS of its legislative functions", reads the statement.

It is sufficient, says NAUFOR, to assign prudential regulation and oversight key financial institutions to the Central Bank. In addition to the proposed reform, NAUFOR also suggests a review of FFMS functions to eliminate excessive functions by delegating them to SROs, which will ease the difficulty of funding the service.

Association experts also think that a wider delegation of powers to the Central Bank should only be considered if the newly created institution is guaranteed independence from the Central Bank in passing decisions that fall within the CB scope of authority.

Financial markets megaregulatorProject Group №1Elvira NabiullinaIgor Shuvalov