Bank of Russia: Brokerage Houses Pass Stress Test

Russia’s eight largest brokerage companies have passed stress tests imposed by the Bank of Russia and proved their resilience to possible shocks, reports citing Reuters.

However, the central bank said many smaller brokerages in the country’s financial market are struggling to survive.

“In general, all these players successfully resisted the shock events embedded in the stress scenarios of brokers. On the other hand, not all brokers were able to do the reverse stress testing,” the Bank of Russia said in a statement.

The regulator has shut down hundreds of banks and brokers that provide access to financial markets for individual investors, in a bid to improve confidence in an industry dogged by bad loans and complex cross-shareholdings.

Larisa Selyutina, head of the securities and commodity markets department at the central bank, said in an interview with Reuters that in some cases, brokers in Russia have to carry out their own stress tests, but in general they are not obliged to report results to the central bank, and the regulator has no immediate plans to change that. 

Selyutina did not say which brokers were checked, nor the criteria used.

Russia’s largest brokers by turnover are Region, BCS, Renaissance Broker, FC Otkritie, UNIVER Capital, ATON, VELES Capital and FINAM, as well as units of VTB and Gazprombank, according to the Moscow Exchange.

The largest by client numbers are Sberbank, Tinkoff Bank, VTB, BCS, FINAM, FC Otkritie, Alfa Bank, ATON, Freedom Finance FRHC.O and ALOR+.

Since 2015, 632 brokers have lost licenses in Russia, mostly for violating laws and due to tougher regulations, more than halving their numbers to a little more than 500 as of mid-2019.

Competition is also driving numbers down, as bigger companies can afford to invest in their product lines and better services, Selyutina said.