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Combining activities in financial market: Bank of Russia’s consultation paper

24 August 2021

The regulator proposes to expand opportunities for combining various activity types in the financial market.

In the future, this will make it possible to switch to regulation based on activity types: financial institutions will be permitted to operate in new areas without establishing a separate legal entity for this purpose. The Bank of Russia presents its approaches in the consultation paper Combining Activity Types in the Financial Market.

The innovations are to enhance the quality of financial services and financial inclusion for customers, improve the efficiency of organisations currently operating in the financial market, and simplify access to the market for new companies.

A top priority is to entitle market participants to combine complementary activities. For instance, non-financial and non-bank financial institutions will be allowed to provide certain payment services, non-governmental pension funds — insurance and non-financial agency services, and insurers will be able to render trust management services and conclude pension agreements.

This transformation will not require an extensive readjustment of market participants’ business processes, whereas regulatory requirements in the course of processes modernisation will help limit arising risks.

The paper describes the mechanisms to control risks, including both financial ones and those associated with a conflict of interest and more complex corporate governance, in every new area where market participants will be allowed to combine activity types.

To implement the initiatives, the Bank of Russia will need significant changes in regulation. According to the Bank of Russia, this process may take several years. Therefore, these proposals will be implemented stage by stage, as they are elaborated and coordinated with the professional community.

The Bank of Russia welcomes your feedback on the consultation paper and answers to the questions therein through 1 October 2021.