Perspectives of synchronization of banking regulation mechanisms in the Eurasian Economic Union’s member states

On April 6, 2017, Moscow State Institute of International Relations (University) (MGIMO-U), Moscow, Russia, hosted an international academic and research conference during which the conference participants discussed various issues of international financial markets and integration processes amid global economic uncertainty.

Eduard Dzhagityan, Associate Professor, School of World Economy, HSE, spoke on systemic risks in the Eurasian Economic Union (EAEU) stemming from different banking regulatory regimes. There are a number of factors that slowdown economic integration in the EAEU and thus entail systemic risks and cause crisis developments in the financial sector. The multidimensional environment of systemic risks requires more advanced instruments of banking regulation that would enable regulators to shape balanced and region-specific standards of prudential banking supervision acceptable for all EAEU member states. Otherwise, the imbalances between the integration objectives and systemic risks multiplication can provoke rejection of the idea of regional regulatory synchronization that eventually may end up with regulatory ‘nationalism’ and lack of regional economic integrity.

Importance of systemic risk diagnostics is also determined by uneven adaptability of EAEU banks to regulatory requirements that are consistent with the objectives of integration and rigor of international banking regulation reform (Basel III). Possible imbalances in adaptation may be further exacerbated by time varying convergence of national regulatory systems of EAEU member states that seems to be inevitable should the asymmetries in national regulatory regimes persist. In the meantime, contemporary banking regulation still lacks reliable tools and techniques of systemic risks minimization that may erose integration targets in the EAEU. It is therefore proposed new approaches towards financial stability by developing a conceptual framework for the EAEU banking regulation mechanism (‘mini-Basel III’) based on the post-crisis principles of the Basel Agreements and standards of Basel III, as well as on delegation of regulatory convergence responsibility to the supranational level.