Financial institution shake-up looks 'promising'
The government is on the right track with its raft of projects to improve the financial sector, analysts say
Natasha Doff - Moscow News - themoscownews.com - 8.22.12 - JRL 2012-152
When rumors swirled earlier this month that authorities were proposing Josef Ackermann as the head of a new financial agency to manage sovereign wealth funds, investors were impressed, and not only because the former Deutsche Bank chief is one of Europe's most prominent bankers.
Whether the businessman ends up in charge of the body or not, the rumor assuming it has some basis of truth is a sign that the authorities are moving in the right direction with a project that could significantly improve the running of the financial sector.
"The fact that they may be considering an independent outsider, like Ackermann, is very encouraging," Vladimir Tikhomirov, an economist at Otkrytiye investment bank, told The Moscow News. "The agency will be looking after sizeable assets and needs to be managed by someone with no domestic interests."
Bearing the burden
The Financial Agency, also called Rosfinagenstvo, will take over the task of managing some $150 billion worth of sovereign funds from state development bank Vneshekonombank, which is currently juggling more projects than it has the capacity to deal with.
While the project has been under discussion in the government for several years, progress only really got under way when it was given a push by President Vladimir Putin in his budget address earlier this year. If all goes to plan, the project will be approved by the State Duma in the fall and the agency will be set up early next year.
As well as managing the Reserve and National Well-Being funds, the piggy bank Russia uses to stash windfall revenues from high oil prices in case of a crisis, the agency will also oversee sovereign debt placements for the government and investment of part of the pensions savings that are still managed by the state pension fund.
This will help resolve a conflict of interests that is currently wreaking havoc in the pension fund, since Vneshekonombank is both an issuer and fund manager of the same bonds.
Ackermann unconfirmed
No confirmation has been given, either from Ackermann or the government, that a proposal was given for the banker to be invited to the new agency's board of directors, as a report in Vedomosti suggested, nor is it certain that he will accept the job if it is offered to him.
However, the rumor has prompted a statement from Deputy Finance Minister Sergei Storchak that the presence of foreigners on the agency's board of directors or observer council would be "welcomed."
Natalia Berezina, a banking analyst at Uralsib investment bank, said that while this unusual welcoming of foreign expertise in Russia's financial dealings is encouraging, it is too early to get overly excited.
"It would be good for Russia to have someone like Ackermann influencing policy, but it is hard to see how one person can influence a whole government structure," Berezina told The Moscow News.
Stability council
The agency is just one of several projects being implemented by the government in a bid to shore up Russia's financial institutions, spurred on by increasingly louder warnings of a second wave of global economic crisis.
Also planned for implementation early next year is a Financial Stability Council, which could be called in to direct policy in case of an economic emergency. In times of economic stability, the council, which will include representatives from all of the key financial institutions, will act more like a discussion group, drawing up proposals for the development of financial markets and monitoring financial systems.
Otkrytiye's Tikhomirov said that the formation of the council was an important project for Russia's financial markets, since the government's response to the crash of Lehman Brothers in 2008 was extremely hectic and conducted without expert consultation.
However, if a new crisis is on its way, it is not certain that the council will be ready in time to deal with it. A government document leaked by Vedomosti on Tuesday suggested that plans for the committee would not be ready for presentation to the State Duma in September as intended due to a delay in approvals from Putin.
Keywords: Russia, Economy, Business, Investment, Trade - Russian News - Russia - Johnson's Russia List
When rumors swirled earlier this month that authorities were proposing Josef Ackermann as the head of a new financial agency to manage sovereign wealth funds, investors were impressed, and not only because the former Deutsche Bank chief is one of Europe's most prominent bankers.
Whether the businessman ends up in charge of the body or not, the rumor assuming it has some basis of truth is a sign that the authorities are moving in the right direction with a project that could significantly improve the running of the financial sector.
"The fact that they may be considering an independent outsider, like Ackermann, is very encouraging," Vladimir Tikhomirov, an economist at Otkrytiye investment bank, told The Moscow News. "The agency will be looking after sizeable assets and needs to be managed by someone with no domestic interests."
Bearing the burden
The Financial Agency, also called Rosfinagenstvo, will take over the task of managing some $150 billion worth of sovereign funds from state development bank Vneshekonombank, which is currently juggling more projects than it has the capacity to deal with.
While the project has been under discussion in the government for several years, progress only really got under way when it was given a push by President Vladimir Putin in his budget address earlier this year. If all goes to plan, the project will be approved by the State Duma in the fall and the agency will be set up early next year.
As well as managing the Reserve and National Well-Being funds, the piggy bank Russia uses to stash windfall revenues from high oil prices in case of a crisis, the agency will also oversee sovereign debt placements for the government and investment of part of the pensions savings that are still managed by the state pension fund.
This will help resolve a conflict of interests that is currently wreaking havoc in the pension fund, since Vneshekonombank is both an issuer and fund manager of the same bonds.
Ackermann unconfirmed
No confirmation has been given, either from Ackermann or the government, that a proposal was given for the banker to be invited to the new agency's board of directors, as a report in Vedomosti suggested, nor is it certain that he will accept the job if it is offered to him.
However, the rumor has prompted a statement from Deputy Finance Minister Sergei Storchak that the presence of foreigners on the agency's board of directors or observer council would be "welcomed."
Natalia Berezina, a banking analyst at Uralsib investment bank, said that while this unusual welcoming of foreign expertise in Russia's financial dealings is encouraging, it is too early to get overly excited.
"It would be good for Russia to have someone like Ackermann influencing policy, but it is hard to see how one person can influence a whole government structure," Berezina told The Moscow News.
Stability council
The agency is just one of several projects being implemented by the government in a bid to shore up Russia's financial institutions, spurred on by increasingly louder warnings of a second wave of global economic crisis.
Also planned for implementation early next year is a Financial Stability Council, which could be called in to direct policy in case of an economic emergency. In times of economic stability, the council, which will include representatives from all of the key financial institutions, will act more like a discussion group, drawing up proposals for the development of financial markets and monitoring financial systems.
Otkrytiye's Tikhomirov said that the formation of the council was an important project for Russia's financial markets, since the government's response to the crash of Lehman Brothers in 2008 was extremely hectic and conducted without expert consultation.
However, if a new crisis is on its way, it is not certain that the council will be ready in time to deal with it. A government document leaked by Vedomosti on Tuesday suggested that plans for the committee would not be ready for presentation to the State Duma in September as intended due to a delay in approvals from Putin.