Russia central bank plan for analyst code stirs finance sector questions

MOSCOW, Dec 17 (Reuters) - The Russian central bank on Tuesday published an ethics code for financial analysts setting professional standards, in a move that raised concerns in the country’s finance sector about possible over-regulation.

The code, which is voluntary, is designed to improve the level of trust in the market, said Sergei Shvetsov, first deputy governor at the central bank.

“We need to strive to ensure that one joins the codes organically, not under constraint,” Shvetsov said.

The code of financial analysts and their managers describes criteria for the qualities practitioners should have, such as professionalism and liabilities to clients.

A further expected step by the central bank and financial market organisations -- to create a list of analysts who comply with the code -- drew criticism from financial market analysts who say that it could compromise their independence by giving Russia’s financial authorities a right to assess them.

A number of market experts told Reuters that they see the move as another attempt to step up market regulation.

“Issuing a quality standard to a financial analyst is a rather risky business,” said Dmitry Dolgin, chief economist at ING Bank in Moscow who previously worked at Gazprombank and Alfa Bank.

The central bank and financial organisations who took part in developing the list of reliable analysts would have to share “reputational damages in the case of a scandal” that otherwise would be carried by an individual analysts and his or her employer, Dolgin said.

The central bank started developing an “analyst code” after a wealth manager at Alfa Capital told his clients in 2017 that they should be vigilant when buying bonds issued by a number of Russian banks, a message that sent ripples across the sector.

It took around a year for the central bank, which back then was shutting banks every few days as it was cleaning up the sector, to investigate the report. The bank decided that the Alfa wealth manager’s advice was not a market manipulation but also was not the best business practice.

Valery Lyakh, head of market violations monitoring at the central bank, said earlier this month that the financial analyst ethics code “will be beneficial for relations between a client and financial organisations and for higher trust on the market.”

Possible consequences for analysts who fail to get onto the list of trustworthy experts were unclear. Currently, there is no such filter and an analyst’s goodwill is determined by the market.

“It is obvious that a leading investment bank won’t hire a bad analyst. Media and news agencies are also a good primary filter,” said a former financial market analyst and economist who used to work at major banks in Moscow. He asked not to be named as he was not authorised to speak publicly in his new role. (Writing by Andrey Ostroukh; Editing by William Maclean)