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President of Russia Dmitry Medvedev: We are holding this latest meeting of the Council for the Financial Market Development in an interesting venue that could probably be called one of the symbols of our growing market and the changes taking place in our country. As I have said on several occasions of late, however, the economic situation in Europe and in the world in general affects our economy and the state of our financial markets too. Their behaviour is very complex and fluctuating, unstable, and this situation is cause for serious concern. A number of European countries and the United States have still not settled their budget deficit issues. Today’s meeting will therefore be useful in helping us to work out our next steps. I hope to discuss all of this today.
We have passed a number of recent laws aimed at bolstering our financial market’s stability. I am referring to the Law on Clearing and Clearing Activity, and the amendments to the Law on Securities and the Law on Bankruptcy. In particular, we have established a risk management system and introduced a mechanism making it possible to avoid a domino effect in the case of bankruptcy of one participant in a particular deal. We also now have the possibility of evaluating systemic markets in the previously un-regulated non-stock market segment, and I hope that we will make the timely decisions required in this area.
All of these changes reflect the general trends in international financial market regulation, including the commitments that we made within the G20 framework. The merger of our two biggest stock markets – the Moscow Interbank Currency Exchange [MICEX] and the Russian Trading System [RTS] – will very soon give us a new consolidated Russian stock exchange, which I hope will be of the capacity required for the financial centre we are planning to develop. There are several other quite good pieces of news, even if of a particular nature, set against the background of the general global difficulties and worrying trends. In particular, Moscow moved up by seven points in the September rating of international financial centres. I do not know just how good an increase this is, but at least it is an increase rather than a decrease. This in itself is not a bad result. Moscow was ranked among the top ten centres with growth potential. This is progress, all the more so as we have no intention of dropping our financial centre development plans, despite the current unstable situation. Our position has to be that this work will continue.
We must continue too, to improve our financial market infrastructure, fine-tune our regulation, and improve the investment climate. This is something we have already discussed on many occasions.
As far as I know, the draft law on the central depositary is very close to approval now. We need to settle the timetable for the law’s adoption. Russian and foreign investors alike must have the possibility to trade assets freely and develop liquid markets and offer goods and financial services.
In this context, we need to take our financial market development to a new level. Simplifying procedures for listing on Russian trading floors, reducing administrative barriers, and cutting the time it takes to issue securities are all big priorities. I hope to hear today at least some common approaches to the work to be undertaken in these particular areas over the coming period.
The International Consultative Council on Establishing an International Financial Centre will meet in a few days’ time with the heads of companies and global financial organisations. I will take part in this meeting too. I think we must be open for cooperation, and I am sure that this will ultimately prove extremely important for Russia, and will benefit all involved.
Of course, the current political situation inevitably has its effect on our work. Russia has entered its latest election cycle, with first the parliamentary election, and then the presidential election next year. But I want to say that this international financial centre development project is a long-term and top priority goal and something that will remain on the agenda no matter what the elections bring. I therefore hope that all of you here, those already working on this project, and those who have just joined this work, will continue your efforts and contribute to the maximum of your possibilities and desire to making this project a reality.
That is what I wanted to say for a start. This Council has its own particular organisation, and based on this organisational structure, and also taking into account the current problems on the global markets, I want to hear from several people today. First, I want to hear from Mr Kudrin [Alexei Kudrin], as the acting president of this Council, and then from Mr Ignatiev [Sergei Ignatiev], as the chairman of the Central Bank.
Mr Kudrin, you have the floor.
President of the Council For the Financial Market Development Alexei Kudrin: Mr President, colleagues,
The international financial centre’s development plan was approved, and it sets out a whole list of draft laws that will improve the regulatory environment for financial operations in Russia. This plan is in the process of implementation. An adjusted plan has been drafted now and will soon get the final approval from the Government. At the same time, we have now come to the point of settling some of the biggest issues of principle. The Council has a working group headed by Mr [Alexander] Voloshin, working on these matters, and this working group has an expert team that includes international experts.
The decisions we will brief you on today were reached with broad participation from international experts and market participants. Establishing a central depositary, for example, will improve and simplify operations and make the transfer of securities ownership rights more reliable, but this issue had remained unresolved since 2007. The draft law was passed in its first reading in 2007, but it is a very complex law, and we have only now settled all of the conceptual side of things and decided on how the system for registering and keeping track of operations will actually be organised. We will give you a more detailed account of these decisions today.
We will also report on what has been done in the area of Russian companies’ information transparency, above all with regard to minority shareholders’ rights. We have come to a decision now on the financial infrastructure’s work on holidays. We will report too on the decisions regarding development of the market for primary distribution on the Russian trading floors and the question of liberalising this market. As you mentioned, the International Consultative Council on Establishing and Developing an International Financial Centre is also due to meet soon. The Council’s meeting today is timely, and most importantly, work has continued full steam ahead since our last meeting. The new draft plan, which will be clarified, will also make a detailed examination of Moscow’s development and the conditions for foreign investors’ work here – things like simplifying the procedures for their business activity. We are following all of these issues closely and can give detailed reports on them today.
Dmitry Medvedev: Thank you, Mr Kudrin.
Mr Ignatiev, it is your turn.
Chairman of The Central Bank Sergei Ignatiev: Mr President, I want to say a few words about the situation on the financial markets.
Dmitry Medvedev: Yes, of course.
Sergei Ignatiev: The situation remains difficult both on the global and Russian financial markets. The situation has stabilised more or less over the last two weeks after the rather abrupt destabilisation in August and September. As you know, the main reasons for the destabilisation in August were the problems with the US state debt, and in September the main reason was the problems a number of European countries were having with their sovereign debt. Unfortunately, this latter problem is taking time to resolve, and European governments have not yet managed to convince the markets that it can be settled quickly and effectively. Regrettably, uncertainty still remains regarding Greece’s debt and the debts of a number of other countries. This of course rattles the financial market actors.
But the situation has levelled out somewhat over the last two weeks. I am talking about the situation on the Russian financial market too and the currency market in particular. The ruble has more or less stabilised and is now at around 32 rubles to the dollar. This exchange rate has shown relatively little fluctuation over the last two weeks, though it is very volatile, but nevertheless, it has stayed stable over this time.
I would say that prices for Russia’s exports remain quite high, and so I do not see any serious risks for our exchange rate. On the contrary, I think we are more likely to see the ruble strengthen rather than weaken, if oil prices remain at their current level.
The Central Bank continues its currency intervention and is now in the process of selling foreign currency in the aim of preventing any sharp fluctuation in the ruble’s exchange rate. But we are selling less currency now and think that the situation will not worsen.
Given that we have been selling foreign currency, this has created something of a ruble liquidity shortage in the banking system. We are now actively offering liquidity in the form of one-day repo transactions and through other instruments. We are offering up to 200 billion rubles every day, for very short periods, one day, as a rule. If necessary, we will increase this offer, up to a trillion if needed. If more is needed, we can offer more, using the instruments we already have at our disposal. Should an emergency arise, we can expand this list of instruments and return to the mechanisms that we used three years ago.
Dmitry Medvedev: Thank you, Mr Ignatiev.