Transcript of the beginning of the meeting:

Vladimir Putin: Mr Pankin, the market has been anticipating the establishment of a new major agency for quite some time now. Market participants and the government believed that there was a need for a large agency that would be a strong and effective regulator. It’s finally been established and you are leading it. This agency is responsible for really important matters and performs very important functions. What are its priorities?  

Dmitry Pankin: Mr Putin, two federal services, the Federal Service for Financial Markets and the Federal Service for Insurance Supervision, are now merging.  Our overriding goal is to maintain supervision over the market during the merger process, because, as usual, the transformation, merger and moving processes might interrupt supervision. Our primary task is to ensure uninterrupted supervision so as to avoid any failures during the transformation process.

The second goal is to control the quality of the capital owned by the insurers and many other players on the securities market. Here’s a recent case of an insurance company. Its authorised capital totals 1.5 billion roubles. It is unable to meet obligations that are worth several tens of million roubles, because it’s just  paper capital, bonds and shares that have no market value. This is a common problem for the insurance and the securities market. We should think about controlling the assets’ structure and quality…

The second point I’d like to draw your attention to is about adopting a huge number of regulatory and legislative documents. We are dealing with a serious challenge: creating an international financial centre for Russia in order to facilitate the work done by domestic and foreign investors. The snag is that there are no straightforward solutions here. Every step involves going against someone’s interests… There are people who support each step and people who oppose it. Let’s talk about admission of Russian securities on international markets. Many Russian issuers have requested that the 25% restriction be removed in order to provide access for the Russian companies to the international markets and attract cheap long-term capital to the Russian markets. On the other hand, if we remove this restriction, we will hamstring the domestic securities market. We will also hamstring our exchanges, depositaries, and registrars.

Take, for instance, capital size. On the one hand, we do need to increase the minimum capital requirements so that professional market participants become more reliable and capable of meeting their obligations. On the other hand, this gives rise to problems with many regional market participants. We cannot weaken and wash away the regional market participants.

Regarding oversight, the key issue is switching to modern oversight techniques. I saw it at our services where people handle tonnes of paperwork, reports, etc. We need to switch to computer databases, and for this we need the appropriate software, which will allow us to get online feedback from market participants and conduct diagnostics using electronic paperwork instead of physical inspections.

Vladimir Putin: You can’t do it effectively using paper-based documents. Papers tend to get misplaced.

Dmitry Pankin: That’s exactly right…

Vladimir Putin:  The volume is colossal, and it will keep growing. In this segment, transitioning to an electronic government is very important. I fully agree with you, we should speed it up.

There’s another point I’d like to draw your attention to. You need to establish very good contacts and relations with the services that are interested in the proper organisation of your work and the timely exchange of information. You need to establish effective relations with neighbouring and parallel agencies, so that you don’t interfere with each other’s work but help and support each other.

Dmitry Pankin: I fully agree. We have already drafted service regulations with the Finance Ministry, settled all disagreements and submitted them to the government for consideration. I believe we’ll set up such joint work arrangements in which everyone knows his place.

Vladimir Putin: There’s another area I’d like to draw your attention to. Obviously this is a government agency and a strong regulator. Still, we need open and transparent contacts with market participants, so that you can not only supervise, regulate and control but also hear from people and get feedback from the market operators.

Dmitry Pankin: Absolutely. We plan to establish a board that will include key financial market participants and hold regular meetings so that we can get feedback from them. We’ll consider whether we want just one board, or maybe we’ll break it up into several units by subject. We will do this, without fail. 

Vladimir Putin: Good.