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Self-regulation in financial market: current state and prospects

25.10.2019 16:12 / The Bank of Russia

The Bank of Russia has analysed the results of the work undertaken by self-regulatory organisations (SROs) of non-bank financial institutions and invites professionals and experts to discuss the prospects of self-regulation in the financial market.

The regulator’s consultation paper notes that the Russian SRO model approximates the foreign model of SRO associations. On the one hand, it respects the interests of financial institutions and prevents the monopolisation of self-regulation by a SRO quasi-regulator, which should include all financial institutions of a certain type. On the other hand, this model bears the risks of a conflict of interests and that the financial stability of an SRO may be eroded if its major players leave the organisation.

Market participants are invited to discuss measures to mitigate risks associated with the selected SRO model, and improve SROs’ control and disciplinary functions. The paper also raises the issue of empowering the regulator to appoint the SRO head and/or independent members of the SRO governance board.

The Bank of Russia finds it necessary to consider the expansion of SROs’ role in the financial market: the possibility of introducing a mandatory self-regulation for credit institutions, SROs’ potential role in regulating agency selling of financial products and control over the activity of key officers of financial institutions, and delegating additional supervisory functions in low-risk areas of the financial market to SROs.

Discussion participants are welcome to submit their comments on the consultation paper, including replies to the questions asked, proposals and remarks to the Bank of Russia until 25 November 2019.

Financial markets megaregulatorProject Group №1