Russian govt might put representatives on Central Bank board of directors

(Kazan, February 26, Tatar-inform). The Russian government is considering putting representatives on the Central Bank of Russia's (CBR) board of directors due to the transfer of part of the government's functions to the bank as part of its merger with the Federal Financial Markets Service (FFMS), reports Interfax.

This possibility was weighed at a meeting presided over by First Deputy Prime Minister Igor Shuvalov, a source familiar with the contents of the meeting told Interfax.

"Since a portion of the government's functions is practically being transferred to the CBR, there is an idea to introduce one or several government representatives, who will exercise control, to the CBR's board of directors," the source said, noting that the new board members might be representatives of the government itself or of the relevant ministries.

That said, the idea is still controversial, since it "has several opponents," the source said.

At the moment, there are 11 people on the CBR's board of directors, all of whom are highly placed CBR employees.

A ministerial source told Interfax that the protocol of Shuvalov's February 19 meeting contains an instruction for the Finance Ministry - during the drafting of regulations on merging the FFMS to the CBR, the ministry is to provide for "the possibility of the realization of a special competence of government representatives in the CBR's management bodies in the adoption of decisions on matters regarding the transferred authorities."

According to the source, the protocol says that the government will still have the power to determine the terms of pension provisions and mandatory pension insurance, as well as to form and register obligations to insured entities.

"This means that the government will be responsible for the social part of the issue, and the CBR for investment issues," the source said.

Furthermore, the government will still implement the federal laws on mandatory types of insurance in which insurance companies fulfill agency rules, including compulsory medical insurance.

The CBR will be endowed with the authority to determine the main accumulative mechanisms for financing pension payouts, with the exception of relations in which one of the parties is the Russian Pension Fund. It will also have the power to execute the federal laws on mandatory types of property insurance and responsibilities to third parties (including for compulsory motor liability insurance), as well as to establish the limits on insurance tariffs, the source said.

In addition, the CBR will be given the power to regulate the activities of joint-stock companies, as well as to set additional requirements for the convocation of the general shareholder meeting.

The source said that while putting together these regulatory acts, the Finance Ministry is to minimize the risk of a conflict of interests connected with the CBR's simultaneous regulation and oversight over the financial market and its participation in the capital of organizations on the financial market.

Besides that, the Finance Ministry must provide for the transfer of several authorities related to the regulation and supervision of associations of professional financial market participants.

According to a source with knowledge of the meeting with Shuvalov, a number of issues related to redistributing powers between the government and CBR have yet to be resolved, particularly with regards to legislative initiatives. There are two options: leave the mechanism as is (the CBR submits its draft laws through the Finance Ministry or State Duma deputies) or grant it the opportunity to send draft laws directly to the government.

The necessary changes to the federal laws on merging the FFMS to the CBR have to be submitted to the State Duma by April 1, the source said.