Five years Eurasian Economic Union: progress in creating a common capital market

_ Yuri Kofner, research assistant, International Institute for Applied Systems Analysis (IIASA). Vienna, February 2020. First published in: Vol 4 No 20 (2019): Trade policy

The common capital market

The finance sector is like the blood stream to every national economy. Effective integration in this field is therefore of pivotal importance to the proper functioning of any economic integration bloc and its common internal market. At the same time, it is a very challenging and delicate matter, since it most profoundly affects a country’s national sovereignty through alterations on the mechanisms of monetary and fiscal policy.

According to the EAEU Treaty its member states plan to establish by 2025 a common financial market in the banking, insurance and equity sectors together with a “supranational financial regulator” to be situated in Kazakhstan. Currently, the EEC, together with national regulators and experts, are working on the preparation of a number of international agreements in this area. One of these key documents for creating the necessary regulatory framework and institutions is the “Concept on the Formation of the EAEU Common Financial Market”, which was adopted at a meeting of the Supreme Eurasian Economic Council (SEEC) in October 2019. In September 2018, the chairmen of the central (national) banks of the member states of the Union signed the “Agreement on the harmonization of the legislation of the EAEU member states in the field of the financial market”.

Relatively speaking, the banking, insurance and stock markets of the EAEU’s member states are characterized by a small number of agents, low capitalization, low liquidity and a developing infrastructure. In 2017 only 661 banks were operating in the EAEU holding USD 1.6 trln in assets, as compared to 6 250 banks operating in the EU with a total of almost USD 50 trln (EUR 43.9 trln) in assets [8]. Russia counts for ca. 90% of the Union’s banking sector. In 2017 there were only 306 insurance companies operating in the EAEU with a total of USD 23.6 bln insurance premiums collected, as compared to 3 400 insurance organizations active in the EU with USD 1.4 trln (EUR 1.2 trln) collected in insurance premiums [9, p. 9]. The same year trading volumes in the Union’s stock markets amounted to USD 848.3 bln as compared to a staggering USD 10.2 trln (EUR 9 trln) traded in total over European stock exchanges [10]. However, in the fintech segment, e.g. instant and contactless e-payments, Russia is relatively competitive in comparison to the EU [11].

Overall, from 2014 to 2018 we can see a consolidation of the EAEU’s banking and insurance sectors. During the study period the number of Eurasian banks decreased by almost 40%, the number of insurance companies by almost 45%. However, the overall capitalization of these markets remained relatively the same at an average of USD 1 458.2 bln measured by total bank assets and of USD 23 bln measured by gross insurance premiums, respectively. At the same time the trading volumes on the EAEU’s major stock exchanges did indeed increase by almost 40% between 2014 and 2018 (Chart 11, Table 11).

Chart 11. EAEU finance market (in USD bln, 2014-2018)

Source: [14, p. 339].

During the study period the share of banks by member state remained relatively the same. Russian banks made up 86% of EAEU banks on average, with the banks of each of the other countries accounting for only 2.7% to 4.5% on average (Table 12). The concentration of the Union’s banking sector is even more pronounced when looking at bank assets. From 2014 to 2018 assets of Russian banks accounted for 91.5% on average of total assets, that of Kazakhstan and Belarus for 5.3% and 2.4% on average (Chart 12, Table 13). This asymmetric country structure is also visible in the insurance sector with Russia, on average, accounting for 73.7% of the EAEU’s insurance companies and for 92.2% of gross insurance premiums collected (Chart 12, Table 14, Table 15). Once again, the situation was different on the Union’s stock markets and where one could observe a distinct geographical diversification: Russia’s share of trading volumes on major stock exchanges decreased from 89% in 2014 to 63.8%, whereas that of Kazakhstan increased from 10% to 35.5% (Chart 12, Table 16). During that period the stock trading volumes of both countries increased, but that of Russia increased by 15.4%, whereas that of Kazakhstan by 83%.

Chart 12. Russia’s predominance in the EAEU finance market (in %, 2014-2018)

Source: [14, p. 339 and author’s calculations].

Potentially due to the fact that the process of forming the common financial market is still its infancy, there are no obstacles per se registered in the EEC’s online obstacle registry. However, the implementation of harmonization procedures and of the common financial policy outlined in the agenda is likely to create various obstacles and frictions. As experts of HSE Eurasian sector noted, the following issues, inter alia, would need to be resolved: language requirements for identification and banking documents; harmonization of national payment systems of the member states (moreover, they do not exist yet in all countries) or the creation of a new supranational payment system; regulating the commission for interbank transfers; restrictions on the amount of money transfer, for example, from Russia to Kyrgyzstan; and the delicate issue of information exchange and database cooperation [12, p. 49].

Neither the introduction of a single currency, nor the creation of a “Eurasian Central Bank” are included in the plans to create a common financial market in the EAEU. On the one hand, as already mentioned, member states are not ready to transfer their exclusive powers on monetary policy to the supranational level. On the other hand, as stated above, at this stage there remains too much divergence and volatility of the member states’ macroeconomic indicators, so that the potential costs would outweigh the possible gains of introducing a single currency in the Union. Much more important for creating a common payment space and for improving the efficiency of the national monetary policies, according to the Commission and to the expert community, would be the de-dollarization of mutual and foreign trade and of the countries’ financial markets, as well as the introduction of a single virtual (digital) settlement unit together with a unified interstate interbank clearing system.

At the same time, the EAEU Treaty foresees the creation of a single supranational supervisor of the common financial market, to be located in Kazakhstan, which, for example, could have the competence to monitor prudential regulation and revoke licenses from commercial banks. However, already the central (national) banks of the EAEU member states are inclined not to transfer supervisory functions to the supranational level. In this case, the interstate harmonization of common rules for supervision and regulation of the EAEU financial market will become a lesser alternative. Problems of the EU and Eurozone banking sector, as well as ongoing discussions on creating a European “banking union”, have shown how important this question is for the stability of interdependent financial markets. In this regard it should be noted, that in 2018 the Astana International Financial Center (AIFC) was officially opened. It is a new regional financial platform and stock exchange within which special jurisdiction has been introduced, and the regulation of relations between participants is based on the best world standards, procedural principles and norms of English common law. The same year the EEC and the AIFC signed a memorandum of cooperation on the development of financial markets, capital markets, trade and investment interaction, as well as on the protection of the rights and interests of consumers of financial services.

According to the above-mentioned comparative study on the degrees of integration of the EAEU’s domestic markets in regard to the free movement of goods, services, capital and labor in comparison to other regional integration blocs [6, p. 72], 46% of the EAEU’s common financial market were established by 2017. This represents a rather large step forward on the path to markets integration in comparison with 2015, when this indicator reached only 33%. In this regard, the EAEU was ahead of ASEAN and MERCOSUR, whose capital markets in 2017 were united by only 23% and 25%. At the same time, all three economic blocs lagged behind the EU, where this indicator amounted to 85%.


Between 2014 and 2018 a consolidation of the EAEU’s banking and insurance sectors in terms of the number of organizations occurred, while their overall capitalization in terms of gross bank assets and gross insurance premiums remained the same. During the same period the Union’s stock markets, however, grew by 2/5 and saw a relative structure shift from Russia to Kazakhstan, due to substantial growth (over 80%) of stocks traded on Kazakhstan’s exchanges. Fittingly, in 2018 the country launched the Astana International Financial Center (AIFC) with the aim to become the region’s main financial hub. Real progress in creating a Union-wide financial market remains to be seem, not due to a lack of effort by the EEC and the national authorities, but since integration work has only just begun in this delicate and key economic sector. In the next five years progress in harmonizing national regulations and policies will be crucial. Introduction of a single currency and of a Eurasian Central Bank neither is, nor should be an objective. Instead, the priority should be, first: on increasing stability and resilience of the member states’ capital markets; and later: on the introduction of  a single virtual (digital) settlement unit together with a unified interstate interbank clearing system and ensuring the transfer of effective regulatory powers to the planned supranational financial regulator.


Table 11. EAEU finance market (2014-2018)

2014 2015 2016 2017 2018
Number of banks 949 840 724 661 578
Bank assets (USD bln) 1 531 1 253 1 445 1 599 1 463
Number of insurance organizations 486 415 337 306 270
Sum of insurance premiums (USD bln) 28.1 18.7 19.2 23.6 25.5
Trading volumes on major stock exchanges (USD bln) 618.4 461.3 487.6 848.3 1 019.0

Source: [14, p. 339]

Table 12. Share of banks by EAEU member state (in %, 2014-2018)

2014 2015 2016 2017 2018
Armenia 2.3% 2.6% 2.6% 2.9% 2.9%
Belarus 3.3% 3.1% 3.3% 3.6% 4.2%
Kazakhstan 4.0% 4.2% 4.6% 4.8% 4.8%
Kyrgyzstan 2.5% 2.9% 3.5% 3.8% 4.3%
Russia 87.9% 87.3% 86.0% 84.9% 83.7%

Source: [14, p. 339 and author’s calculations].

Table 13. Share of bank assets by EAEU member state (in %, 2014-2018)

2014 2015 2016 2017 2018
Armenia 0.5% 0.6% 0.6% 0.6% 0.7%
Belarus 2.7% 2.8% 2.2% 2.2% 2.1%
Kazakhstan 6.5% 5.6% 5.3% 4.6% 4.5%
Kyrgyzstan 0.1% 0.2% 0.2% 0.2% 0.2%
Russia 90.1% 90.8% 91.7% 92.5% 92.5%

Source: [14, p. 339 and author’s calculations].

Table 14. Share of insurance organizations by EAEU member state (in %, 2014-2018)

2014 2015 2016 2017 2018
Armenia 1.4% 1.7% 2.1% 2.3% 2.6%
Belarus 4.9% 5.8% 6.8% 7.2% 5.9%
Kazakhstan 7.0% 8.0% 9.5% 10.5% 10.7%
Kyrgyzstan 3.5% 4.1% 5.6% 6.2% 7.0%
Russia 83.1% 80.5% 76.0% 73.9% 73.7%

Source: [14, p. 339 and author’s calculations].

Table 15. Share of insurance premiums by EAEU member state (in %, 2014-2018)

2014 2015 2016 2017 2018
Armenia 0.3% 0.4% 0.4% 0.3% 0.3%
Belarus 2.5% 2.7% 2.6% 2.3% 2.3%
Kazakhstan 4.7% 6.3% 4.9% 4.3% 4.4%
Kyrgyzstan 0.1% 0.1% 0.1% 0.0% 0.0%
Russia 92.5% 90.5% 92.1% 93.0% 92.9%

Source: [14, p. 339 and author’s calculations].

Table 16. Share of trading volumes on major stock exchanges by EAEU member state (in %, 2014-2018)

2014 2015 2016 2017 2018
Armenia 0.0% 0.0% 0.0% 0.0% 0.0%
Belarus 1.0% 1.3% 1.0% 0.5% 0.6%
Kazakhstan 10.0% 25.2% 25.7% 31.7% 35.5%
Kyrgyzstan 0.0% 0.0% 0.0% 0.0% 0.0%
Russia 89.0% 73.4% 73.2% 67.8% 63.8%

Source: [14, p. 339 and author’s calculations].


  1. European Banking Federation (2019). Banking in Europe: EBF Facts & Figures 2018. URL:
  2. European Insurance and Reinsurance Federation (2018). European Insurance – Key Facts. URL:
  3. Official e-portal of the Federation of European Securities Exchanges (FESE) and author’s calculations. (2019). URL:
  4. OWC (2019). Russia is the leader in cashless payment. URL:
  5. Eurasian sector, HSE (2018). Image of the future of the EAEU in the Eyes of the Academic Community.
  6. For example see: Scharpf Fritz W. (2018). There Is an Alternative: A Two-Tier European Currency Community. MPIfG Discussion Paper 18/7. Max Planck Institute for the Study of Societies. URL:
  7. EEC (2019). Statistical Yearbook of the Eurasian Economic Union. URL:

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