Development of self-regulation in financial market: Bank of Russia consultation paper discussed
The Bank of Russia believes it is too early to reform the current model of self-regulation in the financial market. Today, the main challenge for self-regulatory organisations (SROs) is to improve the quality and effectiveness of supervision over the members’ activities. These conclusions resulted from the public discussion of the consultation paper named ‘Self-regulation in the Russian Financial Market. The Analysis of Effectiveness and Ways to Improve the Existing Model’.
The regulator supports the proposals of SROs emphasising the necessity of taking preventive measures to control financial institutions. These steps will help to avert violations in market participants’ activities early on, thus offering more protection of financial consumers’ interests. The Bank of Russia has also decided to call off the overlapping SRO functions related to the control over financial institutions’ compliance with the requirements of financial market laws and Bank of Russia regulations (except for certain segments, such as the microfinance market). This measure will ease the inspections burden on SROs and their members.
Promoting the principles of ethical and fair conduct in the financial market might be included in the scope of activities for SROs. To do so, SRO basic standards will be updated with the ethical standard.
Taking into account that at the moment SROs’ income is mostly composed of membership fees, market participants and SROs consider the possible expansion of financing channels through adding new services, such as preparing and implementing professional development programmes, hosting conferences, offering consulting, and drawing up internal documents for the members. Moreover, the Bank of Russia intends to formulate an approach to resource adequacy estimation for SROs, and use this approach to monitor the volume and structure of SRO income and expenses. Later it can become the foundation for setting requirements for SRO resources.
The regulator has postponed the question of implementing the SRO concept for credit institutions. However, as fraudulent practices of selling financial products and services to consumers take place, the regulator’s plan is to draft amendments to the existing law that will give the Bank of Russia the right to set sales rules and liability for their violation by credit institutions which sell financial products, both their own and those they sell as agents.