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Central Bank to Offer Licensed Participants Bank Level Client Protection

19.04.2013 13:01 / Interfax

The Central Bank of Russia, following its merger with Federal Financial Market Service (FFMS), will introduce a policy of upgrading licensed non-banks client protection to banking level, said Deputy Chairman of the Central Bank Sergey Shvetsov at Sberbank’s Russia 2013 Forum on Friday.

He reiterated that the megaregulator creation process is currently underway. “This process is driven by the need to harmonize the so-called parallel non-banking system regulation with banking regulation. This does not entail that the regulation will not be the same, but rather that the level of client protection in the parallel system is upgraded to banking regulation standards”, he said.

Shevtsov also said that the Central Bank of Russia has drafted a non-banking financial market SRO bill, currently debated by the MIFC Taskforce. “When a common solution cannot be arrived at by the professional community, there are always SROs, acting as mediators between the state and the licensed participants”, he said, adding that SROs perform three functions: self-regulation, lobbying, cost reduction – for instance, when SROs draft standard master agreements for licensed participants.

“The new bill drafted by the CB aims at preserving the three SRO functions by making licensed participants membership mandatory… SRO reform is bound to be the first step in a series of reforms by the new megaregulator”, said Shvetsov.

He also remarked that the CB is introducing new financial market development instruments, such as tri-party repo launched on 15 April, a major liquidity boost for the Russian market, where up to 70% of portfolios are pledged to the CB. “Tri-party repo is a chance to play push puzzle with the portfolio, changing collateral practically on-line”, he said.

According to Shvetsov, this year the Central Bank plans to introduce floating rates for long-term instruments and switch OTC derivative markets to the Central Counterparty model.

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