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Central Bank Builds Financial Center

06.04.2013 17:34 / Kommersant

FFMS merger with the CB will significantly improve regulation – as expected by reform participants and instigators alike. Yesterday the Bank of Russia, FFMS and Minfin reps made a public presentation of the financial megaregulator, as the process has entered implementation stage. In the meantime, MIFC mastermind Alexander Voloshin sees the future unification of oversight as a key milestone for Moscow as International Financial Center.

Yesterday, the three reps shared details on the megaregulator. According to Head of FFMS Dmitry Pankin, the need for change arises from a unified approach to regulation of diverse financial groups. FFMS also lacks resources. “The workload is building, at the same time jobs have been cut by 20%, the Service headcount is now below 13 hundred”, said Dmitry Pankin. He also stated that the salary is another key issue in regulation: “A local FFMS inspector makes 10-15 thousand Roubles a month, while a university graduate is offered 80-100 thousand in a bank”. This hinders effective financial markets control.

Dmitry Pankin was supported by Deputy Head of Minfin Alexey Moiseev, who said that FFMS has had some thousand functions. “We are in close contact with the parliament and count on their support to pass the law on FFMS –CB function transfer in the spring session”, says Moiseev. Deputy Head of the Central Bank Sergey Shvetsov called future changes “a complex technical challenge”. He said that current discussions include new workplaces for FFMS experts, their salaries, IT merger, etc. Deputy Head of the CB expects all changes to happen in a “non-revolutionary, careful manner, you don’t want to burden the industry with lot of new rules”.

This is why reform leaders and participants have reached an agreement that the CB Act will be only amended to facilitate the FFMS merger. “Inflation targeting is left out, otherwise the bill would have become too complex and difficult to pass”, explained Sergey Shvetsov, adding that CB goal adjustment would follow the FFMS merger.

Meanwhile, Head of MIFC Taskforce Alexander Voloshin expects a lot from the reform. “Our Taskforce planted the roots of the megaregulator”, he told the press yesterday, “this is a vital part of the MIFC process — a common approach will dramatically improve the quality of regulation”. He said that certain complications will arise: transition period risks, when the old model is out and the new one is not yet fully functional, however, this will be alleviated by a gradual dissolution of FFMS in the CB. “Besides, there is a substantial underlying issue: banking and its regulation is strictly conservative”, says Voloshin, “while financial markets are innovative by nature, therefore the regulator faces the challenge of fostering growth instead of suffocating new ideas”.

“Financial infrastructure and regulation are two areas we have been making strides in”, says Alexander Voloshin of the megaregulator in the MIFC context. Next on the MIFC Taskforce agenda is long-term money, better corporate management for the exchange, the CB exiting its own capital, qualified investors recognizing the Central Depositary.

As for Moscow becoming an international financial center, Alexander Voloshin admits that the financial regulation project is an easier task than solving city problems, with road capacity three times below standard for the densely populated Moscow. However, this is far from MIFC’s biggest problem, compared to the need for a better investment climate.

Tatiana Grishina

Financial markets megaregulatorProject Group №1