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. Last Updated: 07/27/2016

Central Bank Economist on Short List to Head FSC




The race to replace Dmitry Vasilyev as head of the Federal Securities Commission is heating up, with a former Central Bank executive heading the short-list.


Dmitry Budakov, a professional economist who started his career in an army intelligence research center, confirmed Monday that he was being considered for the job.


Also on the short list are Sergei Medvedev, deputy head of the federal government administration, and St. Petersburg Deputy Finance Minister Igor Kostikov.


Budakov has been in limbo at the Central Bank since September, when the department he headed - for supervising the securities operations of commercial banks - was dissolved. He first joined the Central Bank in 1992.


"This was my personal political defeat in the Central Bank," Budakov said Monday in a telephone interview.


He criticized Vasilyev's labors at the FSC, pledging to conduct a major reshuffle at the FSC if he is appointed to succeed Vasilyev as chairman.


"Our securities market is three to four years behind the times, [thanks to Vasilyev]," said Budakov.


The FSC would be likely to take a more neutral stance on corporate governance issues if he was appointed its chairman, Budakov added.


"Government officials should not interfere in person," he said.


"They should take court decisions as a guide."


Other reforms could include deregulation of the securities market in line with global trends, Budakov said. He explicitly cited the recent U.S. decision to repeal the Glass-Steagall Act separating commercial and investment banking.


Should he get the chance to carry out such reforms, he would leave the regulation of banks' securities operations with the Central Bank, which currently monitors only commercial banks.


Russian financial institutions involved in investment activity are currently caught in a Catch-22 that prevents them from incorporating as investment banks.


They can only become banks if they receive a Central Bank license. But once they receive a license they fall under Central Bank supervision - and are barred from acting as anything but a commercial bank.


Market participants' reactions to the news that Budakov, 34, could soon be in charge of supervising their actions ranged from neutral to positive.


"He is a real professional," said Ivan Lazarko, president of the National Association of Stock Market Participants.


However, he and others were afraid that some of his ideas would prove too radical.


"One thing I cannot agree with is his idea of breaking the wall between commercial and investment banking," Lazarko said.


He was also not very happy about the idea of a major reshuffle at the FSC, a sentiment shared by other market players.


"The last excuse to keep commercial banks away from the market was the U.S. legislation," said Konstantin Volkov, president of the National Stock Association. "Finally, it has gone even there."