Financial Markets: Increasing Complexity, Maintaining Stability

3–5 July 2019, ST. PETERSBURG

    The Central Bank’s regulation and supervision will be more focused on matters concerning development and stimulation since much of the work required for the recovery of the banking system has already been carried out, Central Bank Governor Elvira Nabiullina said at the International Financial Congress.

    “Traditionally, the goal of financial regulation is perceived solely as limiting risks, while attempts to perform nuanced regulation that would hamper certain businesses and stimulate priority ones have always been perceived as almost being heresy”, Nabiullina said.

    “We need to get an idea of which development problems can be addressed through regulation, and which ones through the opposite. We need to find a balance between limiting risks in certain sectors and the need to stimulate others. This is a serious conceptual challenge”, she said.

    Nabiullina said the regulator has now largely gotten rid of banks whose business was built on illegal transactions as well as numerous chronically unstable banks.

    “As the market is cleaned up and problems at banks are detected earlier, we hope there will be more cases when it would be advisable to try to restore a bank’s solvency and not revoke its license,” she said.

    The Central Bank governor added that the new rehabilitation mechanism put into place by the draft law passed this year will help to develop competition in the banking sector.

    “Consolidation will return banks that are large enough to the market. Right now, the lowest competition is among large banks”, she said.

    The Central Bank’s priorities for the coming year include establishing oversight for financial groups. The regulator hopes to adopt a corresponding bill next year, Nabiullina said.

    The Central Bank sees lending to owners’ businesses, which has caused the collapse of a large number of major banks in recent years, as another priority problem that needs to be resolved.

    “We want the banking community to know that our intentions here are serious, and we will consistently tighten our approaches”, Nabiullina said.

    “Therefore, I advise those who have a business model built on lending to owners’ businesses to think seriously about changing it”.