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Central Bank Goes Out in the Open

30.08.2013 18:10 / Rossiiskaya gazeta

Starting 1 September, a new Central Bank-based financial megaregulator will become operational in Russia. The Central Bank will now supervise banks as well as microfinance, exchange intermediaries and brokers, pension funds and even agricultural credit co-ops.

Federal Financial Markets Service (FFMS) will be dissolved as of the same date.

Delegating supervision over all institutions that handle private savings to a single authority is expected to streamline the system and make it more transparent, say experts, therefore private individuals’ savings will be better protected. People will have more investment options: not only bank deposits, but securities and precious metals. Finally, this kind of unified oversight is designed to prevent financial crises and identify risks, because the entire financial market is instantly visible. The Central Bank has announced that a new division, the Bank of Russia Financial Markets Service, will be established. It will be headed by the Bank of Russia First Deputy Chairman Sergey Shvetsov. The CB release lists 17 types of non-banks, subject to the new division’s oversight.

Radical change in the financial market that will affect people will not be sudden, it will be delayed by a couple of years, says financial analyst Sergey Sueverov. He thinks that more control and transparency in the market as well as new regulations will make new financial instruments more popular. “Besides, the trend towards bank consolidation will build, leaving us with fewer banks”, says the expert. This is due to the megaregulator’s new bank regulations: tougher capital requirements. Small banks are unlikely to survive the change, either closing down or having to merge with majors. On the other hand, the remaining players will become much more robust. Sueverov says the megaregulator may force the passing of laws that are anticipated by a large fraction of the population: the insured portion of bank deposits will grow from 700k to 1 million, the pension system will be reformed.

Sergey Shvetsov has stated earlier that for the Central Bank, Russian financial market development is geared towards the internal investor.

There will be financial awareness projects and financial instruments promotion.

Minority shareholders will receive special attention. “There will be no investment industry until the minority shareholder is protected, therefore we must put in place a system that enables him to buy risks he can assess by statistic and analytical means”, says Shvetsov. Best international practice will be implemented in the basis of regulation.

Roman Markelov, Taras Fomchenkov

Financial markets megaregulatorProject Group №1Sergei Shvetsov