Recent weeks have seen the conclusion of a months-long struggle for control of Russia’s securities market between the Russian Central Bank (RCB) and Dmitry Vasiliev’s Federal Securities Commission (FKTsB). Vasiliev, a protege of Anatoly Chubais, argued that regulation of the securities market should be in the hands of an independent agency in order to prevent commercial banks from dominating the stock market. (That is, he advocates the Anglo-American as opposed to the German model.) (Financial Times, Rossiiskie vesti, June 4).
Although Russian officials suggested late last month that a compromise solution had been reached, with both the RCB and FKTsB sharing responsibility for licensing commercial securities, most observers believe that the Central Bank won the battle. Some suggest that Chubais dumped his liberal ally Vasiliev in order to line up with the powerful banking lobby. (NTV 2 April) Others suggest that RCB chairman Sergei Dubinin’s track record in bringing down inflation makes the RCB a more credible regulator than the untested FKTsB. RCB officials , somewhat unfairly, blame the FKTsB for the legal confusion which prevails in the Russian securities market, which has scared away many investors.
In 1995 it had been agreed that the RCB would regulate the government debt market while the FKTsB monitored the equity market. Now, the two will be unified, with the RCB sharing responsibility for stock transactions. The two rival stock registries — the RCB’s National Deposit Center and the independent Deposit Clearing Company — held a joint press conference on June 10 at which they pledged to merge their activities.
Commercial banks currently account for 80 percent of equity transactions, and most banks see the FKTsB as hostile to them, as evidenced by its practice of granting banks only short term two month licenses. In March Dmitriev made some concessions — extending licenses till October, and withdrawing the ban on banks acting as dealers. But the RCB argued that if it was to maintain a tight grip on the money supply it should also regulate the circulation of securities and other money surrogates. In order to reassure foreign investors, Dubinin has repeatedly stated that the current restrictions on foreigners in the T-bill (GKO) market will be lifted by January 1, 1998. Non-residents are currently putting about $1 billion into the GKO market each month.
The battle for control over the securities market evidenced added piquancy in May, with the news that USAID was ending a $14 million grant program for the FKTsB because of alleged irregularities in the conduct of the American staff managing the project. Two officials from Harvard’s Institute for International Development were accused of privately investing in the Russian equity market while simultaneously helping devise its regulatory framework. (Washington Post, 10 June) Chubais sprang to the defense of the two officials, and blamed the grant’s withdrawal on Russia’s political opponents within USAID. Conspiracy theorists, never in short supply in Moscow, accused Chubais of using the scandal to cover up his own abandonment of the FKTsB.
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