CBR ready to revise capital requirements for brokers

VEDOMOSTI. The Bank of Russia’s Financial Market Service agreed with a proposal made by stock market participants to ease requirements for their capital. Maybe it would be enough to have capital of Rub 2 mln for brokers and delaers and Rub 10 mln for private pension funds and management companies, business daily Vedomosti learned.

Under discussion “is the issue to select capital requirements depending on operations carried out by a broker,” said Sergei Kharlamov, the service’s deputy head, on the sidelines of a financial forum in Ekaterinburg. However, it has so far been premature to talk about any deadline for the revision of the requirements, he pointed out.

Previously Alexei Timofeev, head of the National Association of Stock Market Participants (NAUFOR), sent a letter to Sergei Shvetsov, the head of the Bank of Russia’s Financial Market Service, with a proposal to differentiate the capital requirements for professional stock market participants.

Presently, brokers and dealers should have capital of at least Rub 35 mln, Rub 60 mln for depositaries and Rub 80 mln for management companies. These requirements were introduced in 2007, but they, as Timofeev wrote, “take no account of not only the difference between one kind of activity from another, but also differences among operations that can be carried out as part one and the same kind of activity”. Too strict capital requirements became one of the reasons behind a contraction by nearly a third in the number of professional market participants since 2008, Timofeev wrote, giving as an example US market participants, requirements for whom are much softer. The minimal capital of US brokers that hold funds and securities is $250,000.

NAUFOR suggests that the minimal capital requirements for dealers and brokers should be reduced to Rub 2 mln. If they independently execute client orders or use client funds to their own benefit, the capital requirements will rise to Rub 10 mln, and to Rub 35 mln if they act as a market maker or an underwriter. NAUFOR suggests setting the minimal capital at Rub 10 mln for depositaries that are not settlement or specialized depositaries of investment funds, private pension funds and management companies.

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