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Setting the benchmark in corporate integrity

Russia’s new regulatory body set to bolster corporate governance

Improving both domestic and foreign investor confidence is the aim for Russia's new regulatory body
Russia's Finance Minister Anton Siluanov is expected to play a key role in the formation of the new regulatory body

Improving both domestic and foreign investor confidence is the aim for Russia’s new regulatory body

A new centralisation of Russia’s regulatory bodies could lead to greater transparency and better governance in a country beset by corruption. In September last year, the Bank of Russia Financial Markets Service assumed control of all financial regulations within the country, from securities to pensions and insurance.

The move is aimed at encouraging Russian investors to place their money in the country’s stock markets and reassure pessimistic investors that there is proper oversight throughout Russia’s key industries. According to Sergey Shvetsov, who has been placed in charge of the new regulatory body, Russians have only invested nine percent of their savings in the stock market, far less than the roughly 40 percent seen in the US.

The move is aimed at encouraging Russian investors to place their money in the country’s stock markets

Shvetsov says that boosting those figures is one of his primary goals, and it can be done through improving corporate governance. “We have funding available from Russian citizens. What we need to do is increase the level of corporate governance to build confidence in the markets,” he told InstitutionalInvestor.com.

The process of catching up with the rest of the developed world in terms of governance standards will not be quick, however, and Shvetsov says that support from the government is vital in helping it happen. “I believe that in three to five years Russian markets will gravitate to world norms. But for the next one or two years, we will need support from the government and investors.”

One of the main areas of change is regulating publicly listed companies that are mostly owned by single shareholders. Such a situation is prevalent in Russia and often leads to minority shareholders being totally ignored in the decision making process.

There are also plans to help foreign investors entering Russian markets. While many see great opportunities in lots of the country’s industries, they are often scared off by the assumption that corruption is rife throughout Russia. Trading Russian equities will therefore be increasingly possible for foreign investors through the Euroclear settlement system. Further advancements in this area will hopefully be confirmed by the middle of this year, says Shvetsov.

 

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