Professional participants criticized the proposals made by the Central Bank to combine activities

Stock market participants did not approve the Bank of Russia’s proposal to manage mutual funds for insurance companies, credit and microfinance institutions (MFOs), brokers and non-state pension funds (NPFs) to participate in the activities of management companies. . This was stated by Alexei Timofeev, President of the National Association of Stock Exchange Participants (NAUFOR), in a letter to Vladimir Chistyukhin, Vice President of the Bank of Russia (who learned of the document from Vedomostik). The central bank received a letter and is looking into it along with other responses from financial market participants, a representative of the regulator said.

Members of the association representing management companies, brokers, investment advisers also opposed the authorization of insurance, MFN and MFOs to engage in investment advice and trust management. The only thing the professional participants agree on from the proposed Central Bank is to allow all financial market players to provide payment services, not just banks.

In August, the Bank of Russia presented a report on the market in which it proposed to expand the possibilities of combining different types of activities in the financial market. Institutions controlled by the Central Bank now combine different types of activities, but are not satisfied with the chosen model: legal entities from different market sectors come together under a single brand, without breaking the law. Under the Central Bank’s proposals, any market participant will be able to provide individual payment services, NPFs – for the activities of insurance and financial agencies, and insurance companies -, the provision of trust management services, and the conclusion of pension agreements.

“The structure of the Russian stock market industry is very well developed, and there are no significant reasons for the change,” says a letter from NAUFOR. It is possible to develop competition, increase the level of accessibility of financial services and reduce barriers to entry into the market for new players without changing the views of the restrictions imposed on the combination of activities in the financial market, according to the association.

This result can be achieved by eliminating regulatory arbitrage to attract customers and regulate multi-sector products, as stated in the letter: for example, allowing banks to identify not only one customer, FZ-115, for anti-money laundering purposes. interests of other organizations. It should also eliminate tax arbitrage for similar financial products and services, reduce the operating costs of institutions through the outsourcing of secondary functions, and, where appropriate, reduce the regulations of small financial corporations with limited service offerings.

It is a mistake to use the removal of restrictions to combine activities to solve the problems described above, Timofeev believes: “Then regulation will create new imbalances in favor of combining specialization aside.”

Insurance, credit institutions, MFNs, MFOs and management companies face different risks and this entails different regulations, according to the association’s letter. Insurance companies and MFNs have balance sheet risks, banks and MFOs have credit risks, and management companies have fiduciary risks. For credit and insurance institutions, increased capital and standard requirements, reserve formation and management companies, which do not depend on the amount of funds they manage, have lower requirements, which allows them to reduce costs. Insurance and banking also have large sales networks.

If large agents are allowed to engage in the activities of managers, this will lead to a reduction in the number of managers or a strengthening of the number of insurers or banks. This, according to the paper, will limit competition in the market for management companies in terms of quality and cost of management and reduce transparency: large players will reduce their remuneration and compensate with income through other activities that will not be specialized management companies. able to do.

If you allow insurance, NPFs or MFOs to engage in investment advice, this creates a risk of conflict of interest, making this service an additional sales channel for organizations ’products. In addition, the negative reputation of MFOs, as well as the aggressive practice of selling life insurance with an investment and a funded component – ILI and NSJ – pose reputational risks to the collective investment industry, which can undermine the confidence of a retailer. the investor believes NAUFOR.

The Central Bank report also does not make it clear whether it is proposed to give the NPF the right to manage its assets independently or to allow others to manage their assets, according to a letter from NAUFOR. Both options, according to professional participants, deprive NPFs of their specialization in the administration of the pension scheme and control over the quality of their asset management, creating a conflict of interest.

According to NAUFOR, an alternative to combining activities is a model of cooperation between financial institutions. It should be encouraged to create an open architecture for the sale of financial services, where the products of a company can be sold through different channels, including the channels of other financial groups. NAUFOR participants proposed to the Central Bank to review the market model as a separate type of activity and to suspend the ban on the activities of financial platform operators through the intermediation of the activities of credit institutions and mutual fund management companies. This will expand the range of financial products it offers, as well as shorten the customer journey.

Nikolai Shvaikovsky, head of government relations at Alfa Capital, said that equalizing the requirements for different types of activities within a legal entity could lead to disproportionate quality of financial services. “.

Any significant changes in regulations, especially those involving changes in operations and products, offer more opportunities for large financial groups, says Viktor Dubrovin, Vice President of the Russian Insurance Union (ARIA). One aspect is that if there is no effective demand from the population and companies, “all these actions will lead to one thing – the monopolization of companies,” he said. ARIA supports the Central Bank’s initiative, but in order to implement it, the participants and the regulator itself must “work carefully and harmoniously”.

The second association of professional participants – the National Financial Association – is still preparing its position for the Central Bank, a company representative said.


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