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Govt mulls new financial watchdog
Financial Stability Council to oversee other financial regulators

A new regulatory authority could be established in Russia to oversee operations of the Central Bank of Russia (CBR) and the Federal Financial Markets Service. The cabinet is considering setting up a Financial Stability Council, which would bring together government officials and representatives of regulatory authorities to improve Russias business environment.

Deputy Finance Minister Alexey Moissev told RBC Daily that the creation of the Financial Stability Council has been discussed at a recent cabinet meeting. Ministers pondered merging the existing National Banking Council, CBRs advisory body, which includes representatives from the government, the presidential office, the parliament, the banking industry, as well as experts, with the presidential Council for the Financial Market Development, an advisory body established to enhance state policy on financial market development in Russia.

The National Banking Council is currently charged with approving CBRs annual statement, overseeing distribution of CBRs profits and a number of other aspects of CBRs operations. The presidential Council for the Financial Market Development is involved in drafting proposals on improving the investment climate, protecting investors, and developing the financial market, as well as examining draft laws related to the financial industry. These bodies could be reformed, Moissev pointed out.

This new regulatory authority could be vested with authority to oversee CBR and the Federal Financial Markets Service. Should these two bodies be merged into a single mega-regulator, which is a separate project on the governments agenda, the Financial Stability Council could be entitled to regulate operations of such a body as well. Plans to set up the Financial Stability Council surfaced in spring 2012, when the government proposed to establish an advisory body, which would represent the governments economic block, the Federal Financial Markets Service, CBR, Deposit Insurance Agency, and the Federal Anti-Monopoly Service.

According to Moissev, the Finance Ministry has received proposals on the organizations structure and functions and has submitted them to the government, which has yet to issue a resolution on these initiatives.

If the new body is based on the National Banking Council and gets broad powers, the creation of such an organization makes sense, BDOs Senior Partner Anton Yefremov pointed out. He went on to say that the National Banking Council is not currently limited to making recommendations, but also has leverage on a number of issues, such as approving compensations for CBRs senior executives, adding that the new body should also be in charge of the Federal Financial Markets Service. However, creating yet another regulatory authority is excessive for Russia, President of Association of Russian Banks Garegin Tosunyan pointed out.

The Finance Ministry said that the prospects of the Financial Stability Council and its future attributions will be outlined by October 2012, while the creation of the mega-regulator is expected to take longer. Earlier, Finance Minister Anton Siluanov had said that the regulator, which will emerge from the merger of CBR with the Financial Markets Service, could be established in late 2013 or early 2014, since preparations for the launch of such a body have yet to get off the ground.

Research Department of RIA RosBusinessConsulting

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