Central Bank Attacks FSC Chairman

The struggle between the Central Bank and the Federal Securities Commission for control over Russia's nascent securities market exploded into open war Tuesday, with the bank calling for the dismissal of the commission's head.

A statement released this week by the bank's press service accuses the commission, Russia's securities market watchdog, of inaction and incompetence. The release coincides with a government shake-up that has swept Anatoly Chubais -- who created and presided at one time over the commission -- to the post of sole first deputy premier.

"It would be fair to say that the statement was timed to make the bank's position clear, ahead of the finalization of the changes in the government," Central Bank spokeswoman Tatyana Chapligina said Tuesday.

She said that the statement expressed the view of the bank's top management, and that it amounted to a call for the dismissal of commission chairman Dmitry Vasilyev.

"The Central Bank considers the provocative and unrestrained manner in which chairman Vasilyev allows himself to talk about the Central Bank and its leaders to be unacceptable and not worth commentary," the statement said. "Such behavior on the part of a responsible civil servant characterizes Vasilyev as someone who is not a competent securities specialist and as a man with whom dealings are complicated by his own manners."

First on the list of the Central Bank's complaints is what it calls the commission's failure to put into place a delivery-versus-payment system for the Russian share market. At a March 5 press conference, Vasilyev rejected the bank's opposing vision for an all-Russian share depository.

The Central Bank, which had asked for a 51 percent stake in the depository, had proposed an accounting system that the commission claims would fail to defend shareholders' rights and, therefore, scare off foreign investors.

The bank points out in its statement that foreign investors have flocked to the T-bill market, which is organized by the Central Bank on similar principles.

The statement also outlined Central Bank complaints with a licensing mandate it was granted by the commission concerning the oversight of banking activities on the securities market.

Analysts said Chubais' return to the government will increase Vasilyev's chances of weathering the Central Bank attack."Chubais was the creator and first head of the Federal Securities Commission, and Vasilyev is his protege," said Vladimir Tarachev, head of the Duma sub-committee on the stock market. "Chubais isn't one to forget his friends."

Many investors and analysts who follow developments in the Russian securities market disagreed with the Central Bank's accusations against the commission.

"Any reduction in the powers of the commission would be of enormous concern to the investor community," said Marcia Levy, specialist in Russian corporate law with the legal firm Norton Rose. "The commission has done a great deal for regulation of the securities market."