Transcript of the beginning of the meeting:

Vladimir Putin: Mr Milovidov, what is being done to strengthen the legal framework and what is the financial market like today?

Vladimir Milovidov: First of all, I'll discuss our work on the legal framework and laws directly stemming from the financial market development strategy passed last year. Since its approval by the Government, the Federal Service for Financial Markets has drafted seven laws. The Government has submitted these laws to the State Duma for consideration. Four important laws, including the Law On Countering Market Manipulation and the Use of Insider Information, have already been passed in the first reading. I consider this law to be a highly important element of the Russian financial market. Some laws are intended to streamline legislation, to regulate derivative instruments (derivatives) and the derivatives market.

Other laws specifying stricter liability for financial market violations are also very important. The law envisaging criminal liability for financial market violations has been passed in the first reading. The law on administrative liability has already been signed by the President and has entered into force. We are now applying new fines and new procedure of penalties for financial market violations.

We expect the State Duma to examine a number of laws at its autumn session. At any rate, we are doing our best to ensure that most laws, due to be submitted to the State Duma this year, will be passed in the first and second readings. It would be better if they were passed before the year is out. This primarily concerns the Law On Countering Market Manipulation and the Use of Insider Information that should be passed by the end of 2009.

The creation of a new legal framework for the Russian financial market is probably the best way to facilitate its long-term competitiveness and to cope with crisis processes in the world and on the global financial market. In the long run, this facilitates national stability. No matter how important, popular and effective specific anti-crisis measures may be, I believe that long-term and purposeful work to form a new legal structure is the best way to guard against the processes we have seen in the past 12 months.

As far as the Russian financial market is concerned, I can say that the acute crisis phase is now giving way to preliminary stability. An interesting situation is now shaping up with regard to stock market players. In my opinion, market players are not willing to accept pessimistic assessments of the economy but are still reacting with extreme caution to optimistic indicators.

Although the market is waiting, we can see positive signs. Such signs are linked with the increased number of trading sessions. A record-breaking volume of financial market transactions were closed in the first six months of this year. The number of stock transactions has increased, and the derivatives market has grown. The bond market is also rebounding. In effect, companies, including such major enterprises as Russian Railways, Transneft and some others, have started borrowing new bond issues and are re-entering the market in this way.

This shows that the situation has stabilised to some extent. Although Russian indices did not make a good showing in early July, we are following in the wake of the global market. In the first half of the year, Russia had the second fastest-growing market in the world. Russian indices soared by 58% in the first six months of 2009, second only to China.

Here's more good news. If we assess the duration of foreign and domestic acute crisis phases, then we see that Russia has experienced the shortest crisis phase. Depending on which index is used, the national economic recession lasted between six and nine months, while other countries experienced a 17-20-month slump. In effect, the global market decrease has lasted longer than that in Russia. This is why the Russian crisis was so acute. On the other hand, this implies that some domestic factors propel the market upwards even if the global situation changes slightly.

Although the market has long-term potential, it will remain volatile and unstable for some time. But I hope that the market will mostly withstand this because there have been no major bankruptcies involving financial institutions. Everyone has come through the situation rather calmly. Most analysts predict positive market trends.

Vladimir Putin: What else should we do to maintain this positive trend?

Vladimir Milovidov: To my mind, specific incentives for strengthening capital and enhancing the capitalisation of Russian financial institutions are now the most important and effective approach, because their reliability needs to be strengthened still further in conditions of the crisis.

Vladimir Putin: How about increasing the statutory capital of Vneshtorgbank (VTB)?

Vladimir Milovidov: Exactly. This is very important. We must also gradually increase the capital of rank-and-file financial market investors which must not have the same capital volumes but which must be able to maintain their positions. Naturally, VTB and Vnesheconombank (VEB) have played a positive role during the crisis and have supported the market on several occasions.

The strengthening and possible consolidation of the Russian exchange infrastructure is another highly important long-term issue which cannot be settled overnight. Our exchanges, now posting impressive turnover, begin to compete against each other at a certain point. This does not always influence the Russian market positively.

The gradual training and education of public companies to act from a patriotic point of view is the third high-priority objective. I believe that most initial public offerings (IPOs) should be made in Russia first, which has a sufficiently liquid market. Speaking of Moscow and London, this correlation is now 70 to 30 in Russia's favour. As of late May, the London Stock Exchange and Russia handled $14 billion and almost $50 billion in stock transactions, respectively. Russian market volumes have increased since then. The more speculative and volatile Russian market continues to expand.

Raising financial education standards of all stock market investors, including specialist and amateur traders, is the fourth high-priority objective. Unfortunately, many people fail to comprehend this issue in full. However, well thought-out stock market operations eventually facilitate Russian domestic demand, domestic investment and a domestic base which supports the domestic markets in any country.