OREANDA-NEWS. The Bank of Russia worked out requirements for risk management systems of professional securities market participants. Previously, this procedure was not regulated for brokers, dealers, trust managers, registrars, and depositaries. Now the regulator provides clear guidelines though they will vary across market participants and depend on the nature and scale of the companies' operations. This is the message of the draft regulation 'On the Requirements for Arranging Risk Management System of the Professional Securities Market Participant' published on the Bank of Russia website.

The document implicitly classifies professional securities market participants into three groups: large, medium, and small ones. This approach is used to implement the principle of proportional regulation. Thus, for instance, large and medium companies will have to conduct stress-testing and assess efficiency of the risk management system at least annually. Such requirements will not be applied to the group of small professional market participants. The draft regulation demands that the professional securities market participant appoint a chief risk officer responsible for risk management. At the same time the draft regulation allows to combine the activity of the risk officer with other functions of professional participant (depending on the group) and provides for a case-specific requirements to the professional participant's documents to be elaborated under the risk management system.

The risk management models introduced by the companies are supposed to be economically feasible, i.e. risk management costs will not exceed the potential losses from its realisation. Market participants will have to rank their risks based on comparative estimates to determine the most significant risk factors and focus on them.

The draft regulation also elaborates on risk management outsourcing, e.g., within the banking group. The documents solves the specific issue of priority of requirements for the arrangement of the risk management if the company combines the activity of a professional securities market participant and a credit institution.

The new regulation enables companies to build an efficient risk management system, at the same time professional securities market participants are freed from excessive regulatory pressure.