Audit Chamber: Russia’s financial market stagnates

MOSCOW, Dec 18 (PRIME) -- Russia’s financial market has failed to catch up with other markets in the past several years, the Audit Chamber said in a research note on Wednesday following analysis of the central bank’s main directions of the financial markets’ development in 2016–2018 and in 2019–2021.

“While implementing the main directions in 2016–2018, the Russian economy grew to 43rd place in the global competitiveness index from the 45th. But the situation with development of the financial market did not improve, as Russia occupied the 95th place in 2015–2016 and stayed on the same place in the latest index edition as of October 2019,” the authority said quoting Auditor Alexei Svatyugin.

Russia is 120th in the rating of financial systems’ stability and in the rating by the scale of financial markets it is 77th. This does not correspond to Russia’s positions in the rating of nominal gross domestic product (GDP) and the purchasing-power parity, he said.

Although the 2016–2018 plan was fulfilled by 97.8%, only one out of seven targets for development of the financial market was reached – the amount of assets of insurers. At the same time, the amount of financial market institutions plummeted in the past three years, by up to 50% in some sectors, leading to low competition.

The market growth in the banking sector happened only thanks to individuals, while lending to non-financial companies shrank both in real terms and as a GDP ratio. “This shows unfavorable conditions for lending to the producing economy,” Svatyugin said.

A significant increase of the Moscow Exchange indices and shares of Russian companies also did not become a source of financial resources for companies. “Initial placements with which companies attract capital were episodic and comparatively small,” he said.

The MOEX Russia Index sets records, and the RTS Index is returning to its 7-year highs, but capitalization of some foreign companies exceeds the entire capitalization of the Russian stock market.

“In general, analysis of the financial market sectors confirms the conclusion that it does not correspond to the scale of the Russian economy and to its needs in financial resources and in investment in the first place,” he said.

There are some legal problems in the sector as the law does not define the idea and goals for development of the market or instruments for that. “The Bank of Russia sets its own goals, defines their criteria on its own, and evaluates success of the work on its own as well, which is not entirely correct,” he added.

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