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Financial Market Megaregulator Bill Passed in First Reading

17.05.2013 19:33 / Finmarket

On Friday, the State Duma passed in first reading the bill on the transfer of financial markets legislative, control and supervisory functions of Federal Financial Markets Service (FFMS) to the Bank of Russia.

The bill was introduced by the Russian Government. 47 current legal acts will be amended. The bill is due to be enacted, if passed, on 1 August 2013.

The State Duma Financial Market Committee has stated that the bill is based on the concept of expanding the Bank of Russia mandate to include the Russian financial market stability protection.

The bill includes a series of amendments to key norms regulating the Central Bank, from management structure to additional powers in developing industry accounting standards for non-banks.

For instance, amendments to the Central Bank Act enable the Bank of Russia to perform regulation, control and supervision of non-banks in accordance with laws governing their practices. Non-banks are defined as licensed securities market participants, investment, mutual and private pension fund management companies and their specialized depositaries, joint stock investment funds, clearing houses, central counterparties, trading floors, central depositaries, insurance companies, private pension funds, microfinance companies, consumer credit cooperatives, building societies and credit reference bureaus.

The Central Bank of Russia is not authorized to submit drafts of federal laws and presidential and government decrees to the Government.

Financial markets regulation, control and supervision functions will be delegated to the Central Bank financial oversight committee, that will act as a permanent board of the Bank of Russia department managers.

The committee charter and its structure are approved by the Central Bank Board of Directors, the Committee Head is appointed by the Chairman of the Bank of Russia.

Bank of Russia employees are forbidden from assuming top management positions in financial companies for two years following their resignation, if oversight and control functions were part of their job description.

The Bank of Russia assumes the power to set industry accounting standards for non-banks, IPO prospect and report registration standards for banks and non-banks.

The list of CB functions has been augmented by enforcement of laws on insider trading and market manipulation.

The Bank of Russia will also protect rights and interests of financial market investors as well as insurers, insurance policy holders and beneficiaries.

The CB is also authorized to file for enforcement of orders and requests.

According to amendments, the National Banking Council is renamed National Financial Council. Its mandate now includes financial market development measures, studying financial market regulation reports by the CB Board of Directors, drafting financial market legislation initiatives.

The Bank of Russia will also draft key financial market development strategies and present them to the NFC, the President, the Government and the State Duma. The regulator is also under obligation to publish a financial stability report at least twice a year.

The bill also expands the CB Board of Directors from 12 to 14 seats.

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