The Prospects for Self-Regulation of Financial Markets: The State Regulator's Influence in on the Increase

Abstract

A comparative analysis of the existing model of financial market regulation and the model put forth by the Bank of Russia within the framework of the Draft Federal Law ‘On Self-Regulating Organizations in the Field of Financial Markets’ indicates that the Bank of Russia is creating a new system of regulating the activity of self-regulating organizations operating in Russia’s financial markets, which significantly increases the powers of the state regulator. According to the Draft Law, the state regulator is to become free to unilaterally determine the scope of its own participation in the regulatory process. The unfettered discretion given to the state regulator may significantly undermine the interests of self-regulating organizations and their members, because the Draft Law fails to put forth any formal guarantees that the Bank of Russia should indeed permit such organizations to adequately participate in the process of setting standards and guidelines, or in monitoring the compliance therewith.

Keywords: Russian economy, financial markets

JEL Classification: G0; G1