* One-stop shop for banking, markets oversight
* Central bank markets man Shvetsov promoted
* Opening seen for dove Yudayeva to join central bank
By Douglas Busvine and Oksana Kobzeva
MOSCOW, Aug 21 Russia's central bank on
Wednesday put one of its own in charge of overseeing markets,
consolidating financial regulation as part of a Kremlin push to
revive investor confidence after the trauma of the global
Deputy Chairman Sergei Shvetsov's promotion ends a
decade-old experiment with a standalone regulator that has seen
capital and deals continue to drain away from the Moscow market
even as the economy has staged a weak recovery.
Russia follows Britain in beefing up the regulatory role of
its central bank while, as part of a broader trend, the European
Central Bank will start to oversee system-critical banks in the
euro zone next year.
"Russia does not have a domestic investor base," said Chris
Weafer, a veteran Russia strategist who now runs consultancy
"Creating a super-regulator is a key step, but the
continuing problem is that Russia is very vulnerable to external
investor flows ... The 'super' tag needs to be earned."
During the 2008-09 crisis, the central bank spent $200
billion to defend the rouble before allowing it to depreciate by
more than a third against the dollar. Russian stocks
suffered a peak-to-trough slump of 80 percent.
Although a recent overhaul has boosted the attractiveness of
local bonds to foreign investors, Russian stocks remain unloved.
Shares trade at half their pre-crisis highs, and at an earnings
discount of around half to other emerging markets.
Shvetsov, 42, emerged as the sole contender for the job
after Dmitry Pankin, head of the Federal Service for Financial
Markets (FSFR) that is being wound up, bowed out of contention
In a statement, the central bank confirmed the appointment
of Shvetsov, who until now has been in charge of managing its
half a trillion dollars in foreign reserves. He will also become
a first deputy chairman, effective Sept. 1.
"He was the last candidate," said one source familiar with
the process. Shvetsov declined to comment but was due to hold a
news briefing on Thursday.
The FSFR, founded in 2004, had a narrow mandate and although
under Pankin it upgraded clearing procedures and created a
central securities depositary, it never got to grips with sharp
stock market practices in Moscow.
Shvetsov this year weighed into a controversy over state oil
major Rosneft's $55 billion takeover of TNK-BP
, a deal that enraged minority shareholders because no
offer was made to buy their shares in the Anglo-Russian venture.
He told a conference in April that Rosneft had acted
lawfully: "That means we have to change the rules, and these
rules should defend the minority shareholder," he said then.
Share volumes on the Moscow Exchange fell 38
percent in the year to July, and President Vladimir Putin has
imposed a ban on state companies floating shares abroad after an
exodus to markets like London and New York.
Although Russia enacted a law in 2011 against insider
trading - or profiting illegally from access to privileged
information - there have been no high-profile convictions. A
recent FSFR probe into the takeover of cosmetics firm Kalina
ended up falling foul of the statute of limitations.
Stock trading in Moscow should get a boost from the
introduction in September of so-called T+2 settlement, in which
payment is made two days after a bargain is struck, in line with
international market practice.
But, say investment strategists, what Russia really needs
for market reforms to create a positive snowball effect is a
recovery in economic growth that has slowed to a virtual halt.
Shvetsov's move will clear the way for Ksenia Yudayeva,
Russia's Group of 20 summit coordinator, to assume a senior
central bank post after Putin hosts leaders at a summit in St
Petersburg next month, sources also said.
That would help the central bank's new head, Elvira
Nabiullina, to cement her authority and add a 'dove' to its
monetary policy team, tilting its bias towards pro-growth cuts
in interest rates.
"Nothing helps a financial market like economic growth,"
said Slava Smolyaninov, a strategist at Uralsib Capital. "Any
reform is all well and good, but on its own it won't change the
situation on the market."