RUSSIAN BANKING
SYSTEM AS COMPARED TO INTERNATIONAL TRENDS AND TRADITIONS
RECOMMENDATIONS OF
THE 13TH INTERNATIONAL BANKING CONGRESS
The
congress participants have pointed to largely encouraging trends and improved
performance results in the Russian banking sector
coupled with its expanding role in the country’s economy.
By
and large, the development of the Russian banking system is consistent with
international trends in banking. There has been a gradual progress towards compliance
with international standards in the bank management system, as well as banking
regulatory and supervisory environment, technologies and legislation.
And
yet there is still a number of unsolved problems
hampering a further growth of the Russian banking sector. Of paramount
importance are high operational risks due to mismanagement and low corporate
transparency in the greater part of
The
congress participants have expressed a favourable opinion on the new version of
Russian Banking Sector Development Program aimed at improving the overall economic
performance of the banking sector and expected to render Russian credit
institutions safer and more competitive, as well as preventing them from being
involved in unfair and illegal business activities.
Discussions
held at the congress have resulted in the following recommendations.
To legislative and
executive bodies of the
To strengthen creditors’ rights, primarily claims secured by pledges. To that end, to introduce amendments to the Civil Code of the Russian
Federation and the Federal Laws ‘On Pledges’ and ‘On Insolvency (Bankruptcy) of
Credit Institutions’, providing for the following:
-
in case of a debtor in bankruptcy,
the possibility for secured creditors to get their claims paid without
following the priority rule through selling pledged property; simplifying and
unifying procedures for taking over pledged property and paying creditors’
claims secured by pledges;
-
establishing a system for recording
pledged movable property and property rights (a registration bureau);
-
expanded usage of out-of-court procedures for taking over pledged immovable
property.
In
order to reduce the costs and increase the competitiveness of credit
institutions, to introduce amendments to the applicable law aimed at:
-
cancelling the authority to
exercise unusual functions delegated to banks, in particular, the function of
control over customers’ cash discipline, reducing the tax agent function;
-
removing a ban on acquiring bank
securities by Russian insurance companies, pension funds and other collective
investors;
-
giving credit institutions the
right to close dormant accounts without the consent of account holders;
-
cancelling the fee for opening
branches of credit institutions;
-
removing restrictions for credit
institutions to issue bonds;
-
establishing a simplified procedure
for lending to SMEs;
-
streamlining the requirement set for credit institutions to use cash registers and
POS equipment.
In
order to create more favourable conditions for reducing and managing risks of
credit institutions:
-
to provide legislatively for the
functioning of a credit bureau on a commercial basis, with due observance of
credit account holders’ rights (both legal entities and private individuals)
-
to review the provisions of Article
837 of the Civil Code of the Russian Federation and introduce amendments
thereto giving credit institutions the right to provide in a bank deposit
agreement a procedure for repayment of a deposit before maturity other than to
pay funds on demand without notice of intended withdrawal;
-
to settle legislatively key issues relating to organisation of the market
for derivative financial instruments (DFI), in particular, by introducing basic
definitions of DFI to the Civil Code of the
With
regard to the intensifying processes of bank capital concentration, to study
the possibility of introducing amendments to civil (primarily, the Civil Code
of the Russian Federation) and banking legislation simplifying mergers and
amalgamations of credit institutions; to introduce amendments to the Federal
Law ‘On Banks and Banking’ ensuring that only creditors-private individuals
shall be entitled to demand repayment of their cash claims before maturity, provided
claims arose before the announcement of a merger/amalgamation by credit
institutions.
To
reinforce legal mechanisms for preventing dishonest people to establish control
over credit institutions; to set legislative requirements for credit institutions
to submit data about owners and top management of credit institutions,
including data about the financial condition and business reputation of persons
who may have a significant influence on decision-making by governing bodies of
credit institutions (i.e. beneficial owners).
To
take measures to improve legislation on combating money laundering and
financing of terrorism in accordance with international standards, in
particular:
To
set a requirement to identify ultimate beneficiaries of bank transactions and
beneficial owners of legal entities;
To
expand the authority of supervisory bodies to set requirements relating to
organisation of internal control aimed at combating money laundering and
financing of terrorism;
To give credit institutions the right to terminate bank account
(deposit) agreements in cases envisaged by law.
To
improve legal mechanisms for liquidating credit institutions which have their
banking licences revoked. To that end, to ensure:
Prompt
adoption of amendments to the Federal Law ‘On Insolvency (Bankruptcy) of Credit
Institutions’ providing for streamlining and accelerating bankruptcy procedures
for credit institutions, enhancing the protection of creditors’ and depositors’
rights, and delegating the receiver function to the Deposit Insurance Agency;
Introduction
of changes and additions to the applicable law limiting the possibility to
suspend supervisory review measures in case of filing an appeal or in case of
filing statements of claim against credit institutions.
In
order to create the required legal conditions for sustainable development of
the banking sector, promotion of competition and prevention of actions
restricting the freedom of commercial activities in banking, to adopt the
following amendments to the applicable law:
Providing
for the introduction of a notification procedure for acquiring more than 1 per
cent of shares (stocks) in the share (stock) capital of a credit institution by
residents and non-residents and a licensing procedure for acquiring more than
10 per cent of shares (stocks) in the share (stock) capital of a credit
institution by residents and non-residents;
Aimed at protecting the interests of customers during consolidations,
mergers and transformations of credit institutions.
To
draft changes and additions to the Federal Laws ‘On Banks and Banking’ and ‘On
the Central Bank of the Russian Federation (the Bank of Russia)’ aimed at
defining more precisely, based on the recommendations of the Basel Committee on
Banking Supervision and the best international practice, consolidated
supervision provisions, including fixing legislatively the authority of the
Bank of Russia to supervise the activities of bank holdings; to bring legal
norms regulating the activities of bank groups and bank holdings, as well as
disclosure of information about their activities to the interested users, into
compliance with the internationally accepted accounting standards.
To
determine as the first priority task legislative acceptance of IAS in the
To accelerate the adoption of the Federal Law ‘On Consolidated
Financial Statements’.
To the Government of
the
To
ensure the drafting of legal acts listed in the previous section and the
provision of assistance when passing them through legislative bodies.
To take comprehensive measures to organise the functioning of a retail
deposit insurance system.
To
promptly implement a host of measures based on the requirements of the Federal
Law ‘On Currency Regulation and Currency Control’.
To
contribute to the growth of demand for bank loans on the part of the real
sector of the economy by means of the monetary policy through implementing
measures aimed at reducing inflation and interest rates in the financial market
and ensuring the predictability of macro-economic indicators and smooth
fluctuations in the Rouble exchange rate.
To
draft legal acts on co-ordination of burglar-alarm systems used at banking
premises setting clear uniform requirements and determining sets of documents
to be submitted by credit institutions when getting their branches or other
sub-divisions registered.
To provide assistance to regional authorities in implementing regional
programs of lending to SMEs.
Based on the improvement of and amendments (additions) to IAS, to
continue drafting new and adjusting the applicable legal and normative acts on
preparation of financial statements and accounting.
To
continuously conduct training and re-training of personnel in charge of
preparing financial statements to IAS.
To
organise basic professional training for lecturers and students of higher
educational establishments, as well as re-training for specialists
dealing with accounting and financial statements to IAS.
To start developing uniform educational standards in the area of
accounting and financial statements to IAS.
To develop and approve auditing standards regulating the application of
international accounting standards (IAS).
To organise the process of teaching IAS to Russian auditors and develop
mandatory qualification requirements for auditors certifying the fair
presentation of IAS financial statements.
To the Bank of
To develop risk-orientated approaches, including the implementation of
a rapid response system providing for express evaluation of activities
conducted by credit institutions and taking timely and effective supervisory
review measures based on, primarily, the nature and real value of banking risks
with regard to their potential influence upon the soundness of credit
institutions.
In
accordance with the applicable law, to realise a host of measures aimed at
minimising the risks of the emerging deposit insurance system, primarily through
preventing participation in this system of unsound banks.
To continue forming an institute of credit institution overseers.
To
amend legal and normative acts so as to provide for a simplified procedure for
opening and registration of credit institutions’ branches.
To reduce the number of reporting forms and simplify the reporting
procedure for credit institutions.
To
issue normative acts regulating the procedure for establishing movable cash
offices by banks.
To
develop a system of bank refinancing through granting loans secured by
government bonds, bonds issued by Russian regions having an acceptable rating,
and bonds issued by the Bank of Russia.
To
exercise more stringent control over the results of application by credit
institutions of internal control rules and procedures aimed at combating money
laundering and financing of terrorism, in particular, through implementing, in
addition to inspections, a system of remote control over compliance with the
relevant law by credit institutions.
To continue publishing macro-prudential indicators characterising key
parameters of the banking sector of the
To
continue improving the existing payment system of Russia, including measures
aimed at enhancing funds transfers, implementing modern data transfer
technologies and methods, and providing effective and uninterrupted service to
participants of the settlement system.
In
co-operation with representatives of the banking community, to develop, based on the experience of the developed countries,
a normative document contributing to forming adequate approaches to the
activities, and control over the activities, of bank holdings.
Based on the analysis of IAS financial statements of credit
institutions as at
To
organise permanent consultations on IAS application, in particular, through
placing answers to questions arising at credit institutions on the official
site of the Bank of Russia.
To credit
institutions and their associations:
In
order to raise the quality of bank service, to develop management systems,
including risk management, and internal control; to widely use the best
international practice reflected inter alia in the recommendations of the Basel
Committee on Banking Supervision.
To
strengthen activities aimed at raising asset quality.
To avoid ‘fraud’ capitalisation and other forms of ‘window-dressing’.
In
order to prevent the penetration of criminal capital into the Russian banking
sector, to ensure compliance with the requirements of the Federal Law ‘On
Combating Money Laundering and Financing of Terrorism’, being guided by the
best international practice.
To ensure the transparency of credit institutions’ ownership structure.
To
enhance the transparency of credit institutions’ activities based on the
international banking practice; to ensure unconditional reliability of
disclosures; to undertake measures ensuring an effective access of interested
users of all categories (shareholders, members, customers and counterparties)
to the information about the activities of credit institutions disclosed in
accordance with the applicable law. For the purposes of timely and reliable
disclosure of information about own activities, to use Internet resources more
widely, primarily through creating and maintaining own Internet sites.
In
order to effectively solve the task of combating money laundering, to ensure
compliance with the principle ‘Know Your Customer’, continuously take efforts
aimed at raising the professional level and banking culture of bank employees
guided by the internationally accepted business ethics, including the Code of
Banking Ethics approved by the banking community in April 2002.
To develop and adopt corporate governance standards within the
framework of bank associations.
To
pay special attention to training credit institutions’ specialists in the area
of IAS application.