The draft law has been developed by the Ministry of Finance in accordance with Clause 19 of the Action Plan to Implement the Russian Banking Sector Development Strategy until 2015.
The document specifies the provisions of the Federal Law On the Insurance of Personal Deposits in Russian Banks and alters the terms of banks’ participation in the Deposit Insurance Scheme (hereinafter, the DIS). It also specifies provisions for imposing bans on banks in accepting personal deposits, as well as opening and performing banking operations.
Under the draft law, the requirements for the participation of banks in the DIS are to be amended as follows:
- banks are to disclose the identity of anyone that has a significant (direct or indirect) influence on decisions made by its management to anyone requesting it;
- the indicators used to assess a bank’s financial stability are to be specified;
- the Bank of Russia is to clarify the procedure for assessing a bank’s financial stability as sufficient, as well as the procedure for establishing and publishing methodologies used for assessing a bank’s financial stability, its indicators, as well as the procedure for disclosing the identity of anyone that has a significant (direct or indirect) influence on decisions made by a bank’s governing bodies;
- in cases when an in situ inspection of a bank’s accounting discipline and its compliance with the DIS requirements, caused by a lack of data obtainable by remote surveillance, has been carried out within three months prior to the bank’s clearance application, the Bank of Russia shall be allowed to abstain from a repeat inspection which such an application would otherwise require.
The draft suggests the following grounds on which a bank may be declared to be in non-compliance with the DIS requirements:
- a repeated recognition, within one year, of the bank’s accounting returns as unreliable by the Bank of Russia;
- a repeated, for three months running, unsatisfactory rating of the bank’s ownership transparency and management standards;
- the bank’s non-compliance, for six months running, with the same mandatory requirement, excluding cases in which such non-compliance may be caused by a reformulation of the requirement;
- the bank’s non-compliance, for three months running, with the requirements for unlimited disclosure of the identity of the individuals who are directly or indirectly responsible for its managerial decisions.
However, the grounds on which a bank may be declared to be in non-compliance with the DIS requirements should exclude such financial indicators as the overall capital, value of assets and liquidity level, which, as part of the strict criteria of a bank’s stability assessment generally applied by the Bank of Russia, may cause an unnecessary exclusion of some banks which, despite certain discrepancies, are otherwise quite reliable in terms of customer safety.
The draft law obliges the Bank of Russia to be transparent in its deliberations. The bank, in respect of which constraints on the acceptance of personal deposits, opening of accounts and other banking services to private customers are imposed, must be kept informed of the discrepancies which caused the decision, thereby enabling it to take relevant remedial measures.
The draft also contains editing corrections to some of the Law’s provisions.
The draft law aims to clarify and simplify the assessment of DIS compliance. Eliminating the risk of unnecessary exclusion by the Bank of Russia on purely formal grounds of financially stable institutions from relevant activities will benefit the banking system as a whole, as well as individual banks.
The document will be considered at a Government meeting.