Developing competition on the market of financial services: plans of the regulators

FAS and the Bank of Russia answered questions from the media

On 26 June 2017, FAS and the Bank of Russia gave a joint briefing in Moscow at the Office of the Federal Antimonopoly Service on the “Road Map for developing competition on the market of financial services: the expected results”.

First Deputy Chairman of the Bank of Russia, Sergey Shvetsov, and Deputy Head of FAS Andrey Kashevarov answered questions from journalists representing federal and regional media.

Before the Q&A session, the speakers emphasized the readiness of the regulators to pursue close cooperation and combine the available tools to support development of the competitive environment on the financial market.

As Sergey Shvetsov pointed out in his introductory remarks, competition development is an essential tool to achieve the task for the Bank of Russia to create a strong financial market, capable to serve the needs of individuals and Russian economy in general as well as the financial industry in particular.

Taking an advantage of the opportunity to obtain regulators’ comments on different areas of the Road Map, media representatives asked various questions on the progress, particular measures and the expected results of the Road Map events.

For example, the speakers from FAS and the Bank of Russia answered questions on possibility to limit a share of a single creditor on the basis of the average market value of the full loan costs, which by law the market participants cannot exceed by more than one third.  

They emphasized the unanimity regarding the need for such a restriction but also mentioned discussions about the maximum size of the single creditor share that should be taken into account to calculate the average market value of the full loan costs.

Explaining the need for this measure, the speakers stated that it is designed to provide fair market pricing for consumer loans and reduce the effect of possible violations of the antimonopoly law by the dominant market participants.

As for the OSAGO market [third party mandatory vehicle liability insurance], Deputy Head of FAS outlined the plans to study the conditions of insurers offering representative services in the regions in order to work out proposals on expanding the list of possible representatives. He drew attention to FAS preliminary position that any legal entities can perform part of such functions. Andrey Kashevarov reported arrangements to submit proposals to the Bank of Russia designed to clarify and detail approaches determining the size of expenses for repair of damaged vehicles depending on a particular economic region.

Another question at the briefing concerned possibility by FAS and the Bank of Russia to change the procedure for compiling the Committee of the users of central depository services to ensure that service users may exercise the required market influence upon the tariff policy of the central depository. According to the speakers, possibility of such influence by all consumer categories requires additional monitoring and assessment.

Discussing the vector of developing competition on the forex-dealers market, the speakers, in particular, talked about the ongoing efforts to identify possible ways to exclude the practice of attracting customers by persons that do no possess the licenses of the Bank of Russia, such as through training centres. The Bank of Russia and FAS have already agreed to exchange information about signs of violating the advertising law and they consider other possible solutions, particularly in cooperation with the Ministry of Education of Russia.

One more question at the briefing was about the measures planned to suppress infringements of the rights of individuals for choosing organizations, including banks, through which individuals can receive social or other types of payments.  In FAS opinion, such measures should cover properly disseminating information to the population about their rights, and additional measures to prevent violations of the antimonopoly law. FAS has already reached certain arrangements, particularly, with the Ministry of Labour, that within its competences will outreach the bodies and organizations that directly manage specific payments in the regions.

To support competition on the payment market, according to Andrey Kashevarov, in the near future FAS will discuss direct prohibition of including the services of third party providers, who accept payments from the population, to the utility tariffs.

In the opinion of Deputy Head of FAS, including these costs in the tariffs distort price competition on the market of services for monetary funds acceptance and transfer because some banks are allowed not to charge the commission from individuals directly and rather do it through utility tariffs. It also forces some individuals to pay “double” commission for the funds transfer if payments are not made through the “right” bank, with which a utility company works.  

Answering a question about specific issues on the market of leasing, Andrey Kashevarov described several subsidy programmes, when subsidies are granted only to large leasing companies, unreasonably deteriorating the positions of smaller participants. He said that implementing the Road Map, FAS has already approached the Government of the Russian Federation with proposals to amend the rules for subsidizing leasing companies in order to support competition. The interested bodies are now looking into the issue.

Deputy Head of FAS also informed about analyzing a draft law designed to regulate leasing companies. Based on its findings, FAS concluded that no significant deterioration of competitive conditions on the market will occur if the draft law is adopted. Although some market players (as estimated, up to 2% sectoral assets) will exit the market due to the requirements to the owhership capital, they have alternatives, such as leasing and selling property by installments, etc.

Adopting the act in its current edition, in particular, with the requirements to include leasing organizations in the State Register and form detailed reporting should increase market transparency, generate additional conditions for establishing the tools to develop competition, suppress and prevent violations of the law, including the antimonopoly law. FAS final position will be shaped upon the results of the current market survey.