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One of the top officials at the Bank of Russia insists that banks do not need the Forex business at all, as it is closer to gambling rather than financial activities.
Sergey Shvetsov, first deputy governor of the Bank of Russia, has drawn the attention of the Forex industry again by stating that a new law will prohibit the combination of Forex and banking businesses in the portfolio of any company. Speaking to Vedomosti, Shvetsov said that separating the banking from the Forex business aims at protecting individuals from the risks of excessive leverage. He added that Russian banks do not need to conduct any FX business, given that it is more of a gambling activity rather than a financial service.
Shvetsov said that this idea will be outlined in the future Forex law, which is set to come into force in March 2015. The top official stated that the separation of the banking and Forex businesses will be included in the amendments to the FX bill, which still awaits its second reading in the parliament.
The text of the current version of the Russia forex bill does not say anything about a split of banking and Forex services. It does, however, stipulate some differences in regulation of Forex dealers that are also banks and Forex dealers that are not banks. To give an example, one of these differences concerns the keeping of client funds.
Does this mean that Shvetsov has simply showed off his outspoken personality one more time and that the plans he has voiced will probably not materialize? Given the fate of his previous forecasts, we dare to suggest that his words should be taken seriously.
He had pushed for stricter rules for Forex advertising and we see these stricter rules in the new version of the FX bill. He had also called for a ban on foreign financial organizations offering FX services in Russia. This has also led to an amendment to the FX bill, according to which foreign companies will be allowed to market their Forex services in Russia only if they have the necessary permission by the Central Bank.
This is not the first time that Shvetsov voices an extremely critical position towards the Forex business. In the past he has become famous for comparing Forex trading to smoking. According to him, the damage that smoking can bring to your health is equal to the damage FX trading can do to your wallet.
Such a regulatory change, coupled with the high minimum capital requirements for Russian FX brokers, would not be a desirable piece of news for the Forex industry. There are hardly any FX brokers that would be able to meet the requirement of RUB 100 million minimum net capital; such a demand is not scary to banks. However, with small players pushed away by the capital demands and banks set to be legally prevented from offering FX services, it is doubtful that Russia will have a full-blown Forex industry ever.
You can find out more about the Russia FX bill in the law database of the Russian State Duma. The second reading is expected to be held on November 21, 2014, unless it is rescheduled once again.