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Bank of Russia begins to fulfil functions of mega regulator

September 01, 2013, 2:01 UTC+3

Several provisions of the law on the mega regulator will come into force later

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MOSCOW, September 1 (Itar-Tass) - Russia’s Central Bank (Bank of Russia), which will now carry out functions of the former Federal Financial Markets Service /FSFR/, begins from September 1 to work as a mega regulator.

To fulfil the functions of FSFR, the Central Bank has organised a Service on Financial Markets, which Head will be Sergei Shvetsov. In this position, he will also be the Central Bank’s Deputy Chairperson.

Under the new provisions, the Bank of Russia offers and implements policies to develop and provide stability of the Russian financial market. The Bank will regulate, control and supervise corporate relations of joint stock companies and activities of non-credit financial organisations - including insurance, clearing, micro-financial, pension funds, mutual funds, etc.

The Central Bank will protect rights and legal interests of the insured, insurers, depositors and members of non-state pension funds, shareholders and investors in financial markets.

The National Bank Council will be rebranded into the National Financial Council, which members will be, besides the mega regulator’s head, representatives of the State Duma, the Federation Council, the president and the government. The term of the chairperson and the council’s members changes from four to five years, and the number of members of the board of directors changes from 13 to 15.

From now on, the Central Bank’s main objective of the monetary policy is “protection and stability of the roubles by means of supporting the price stability.” Besides, the Central Bank has received the right to give loans to banks under guarantees in equities or other assets for any terms. Previously, the term could not be over one year.

Several provisions of the law on the mega regulator will come into force later. For example, from January 1, 2015, the Bank of Russia will have the right to offer sector standards of accounting for non-credit financial organisations.

“No changes will happen within next six months, as the new regulator is not interested in having the market participants suffer from a shock from regulations,” Managing Director of the Alor Group of Companies Sergei Khestanov said. He explained that under the conditions of the “rather flat” Russian market any abrupt initiatives may cause negative consequences. He believes further strategy will be clear when all re-organising processes are over. “The Central Bank is a more conservative organisation than the former FSFR, and it is not clear yet for sure in what direction the regulation may go,” he said.

The Central Bank’s newly appointed Head of the Financial Markets Service Sergei Shvetsov said earlier that his major tasks in the new position would be improvement of the supervision quality, development of the sector legislation and competition, protection of rights of consumers of financial markets’ services and of minority shareholders.

Standard & Poor’s forecasts the new mega regulator, based on the Bank of Russia, will favour the situation in the sector. First of all, by unification of the regulation regime and of accountancy of organisations, thus improving long-term ratings of Russian financial organisations. However, the rating agency’s analysts say a positive result will require strict following of all new regulations.

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