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Ministry for Economic Development Proposes Independent Market-Financed Megaregulator Within 5 Years

02.11.2012 14:33 / Interfax

Minister for Economic Development Andrey Belousov has forwarded draft Government Policy 2018 proposals.

The Ministry for Economic Development draft includes a new, fourth, financial market megaregulator scenario.

Today the government is looking at three versions: Federal Financial Markets Service (FFMS) joins the Central Bank, the Central Bank creates a separate agency with delegated FFMS powers, and reinforcing the authority of FFMS.

At an international financial center meeting in late October, Prime Minister Dmitry Medvedev gave ministries an assignment to draft Russian megaregulator scenarios within a month.

The Ministry for Economic Development draft proposes to improve financial regulation as part of a “gradual transition to megaregulation”.

The document states that in the next five years necessary conditions should be in place: unification of regulation and oversight in various financial market sectors in accordance with top international standards, as well as introducing the legal form of incorporation for financial megaregulator. Also, financing issues should be resolved, in part by an additional fee from financial companies.

At the same time, states the Ministry for Economic Development draft, unification must cover all similar functions and operations irrespective of a financial institution’s current oversight reporting (uniform rules of investment for all collective investors, including bank-managed funds and insurers, uniform rules for securities issue registration etc).

"After this, the megaregulator must be established as a specialized authority, acting as a subject of public law and combining regulations and oversight functions in all financial market sectors, with no internal conflict of interest due to other functions”, reads the draft.

National Securities Market Participants Association Head Alexey Timofeev told Interfax that this megaregulator scenario is already the fourth, and its ultimate purpose is establishing an authority independent from the Central Bank of Russia and executive power, in a manner similar to Great Britain and France.

"This variant provides equality for all market participants, including the state ", he says.

The Ministry for Economic Development also plans to increase the role of SROs in financial market oversight and within the next three years regulation and oversight will be introduced in formerly unregulated financial market segments (forex brokers, credit rating agencies) in accordance with international Financial Stability Council recommendations.

The document also states that Russia will create an intra-ministerial financial stability council to control system risks in the financial sector. Oversight authorities and companies will exchange documents in electronic form.

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