Consolidated regulation of non-bank financial institutions: discussion starts
The Bank of Russia proposes a unified system of cross-sectoral regulation of financial market associations.
To this end, existing regulatory requirements for banking groups and holdings would be complemented with similar requirements for associations of core non-bank financial institutions (NFIs). The regulator intends to hold a discussion of relevant legislative amendments with stakeholders that include governmental agencies, market players and experts.
New regulation is needed to ensure financial stability of NFIs and protect their customers, given that the stability of group companies mainly depends on group risks and overall resilience of the financial association.
Similar to banking regulation, the financial group and financial holding concepts would be introduced to apply to associations of non-governmental pension funds, insurers, professional securities market participants, management companies, microfinance and clearing organisations and trade organisers. Such groups and holdings would be obliged to notify the Bank of Russia of the setup of their association, disclose information about its activities and submit statements.
Also, special requirements would be in place for financial stability of NFI-controlled associations: the capital adequacy ratio, risk management, capital management, internal control requirements and rules for financial stability recovery plans.
The new requirements would only apply to major financial institutions, whose criteria would be determined by the Bank of Russia.
Under the proposal, banking groups and holdings would be recognised as subtypes of financial associations to the effect that their regulation would overall remain unaffected.