RECOMMENDATIONS
OF THE XVII™ INTERNATIONAL BANKING CONGRESS
Participants of the XVIIth
International Banking Congress note the impressive results of Russian banking
sector development over recent years. Volumes of assets, capital, corporate and
retail credits, deposits, and also the role of banking sector have
significantly increased in economy development. Especially fast growth of the
banking services market was marked in 2007, despite a certain slowdown, the
banking sector developed with high rates also in the first months of 2008.
At the same time, as international experience
shows, high growth of banking business, including crediting, is accompanied by
intensive accumulation of banking risks. Turbulence in world finance, noted
from the second half of 2007, was a serious check on the stability of the
Russian banking sector. Losses of the largest world financial institutions have
led to a global overvalue of risks, freezing of liquidity and trust decrease
between market participants. Investors and creditors have limited operations
with countries with developing markets which has had an influence on the
Russian banking services market as well. For Russian credit institutions access
to external loans has become significantly complicated and the cost of their
attraction has increased.
Steady development of the Russian banking sector
in the sharpest phases of crisis in the world financial markets was promoted by
the coordinated activities of the Government of the Russian Federation and the
Bank of Russia operatively reacting to the situation by growth of volumes of
offered liquidity. Russian banks during this period also adapted quickly enough
to the changed terms of business dealing and have shown the necessary level of
mutual trust that promoted minimization of negative consequences of the crisis
in the international financial market.
Instability of the international financial
markets has visually shown the necessity of more attention of banks and
supervising bodies to effective control over risks; first of all over credit
risk and risk of liquidity. The given events have also underlined the meaning
of transparency, conservative approaches to risk estimation, necessity of
stress-testing and working out actions in case of unforeseen situations.
The changed external terms of activity
objectively focus Russian banks on updating the strategy which has developed in
the period of credit expansion, to more conservative approaches. The task is
not easy, especially if we take into account tougher competition in the Russian
banking services market, including due to the growth of foreign capital and
expansion of regional networks of the largest banks.
The priority task now is to strengthen the
stability of credit institutions, banking groups and the Russian banking sector
by means of perfecting risk management systems and by means of internal
control system, development of corporate governance and transparency.
Additional requirements make demands on quality of banking activity regulation
and the banking supervision system. Simultaneously keeping a
high urgency the tasks of preserving conditions for dynamic development of
banking services.
Taking into account the current discussion and
the number of Recommendations accepted by the XVIlh
International Banking Congress are still relevant, participants of the Congress
recommend:
To the credit institutions and their
associations:
1.
To continue work on capitalization increase, at the expense of the
owners and also of new participants' attraction, including using initial public
offering of shares among wide range of investors, including the population.
2.
To continue further development of the risk management system and
internal control taking into account international practice:
- To
proceed from the requirements that responsibility for
appropriate functioning of risk management system of bank lies on the Board of
Directors and the top management;
- To
pay special attention to questions of risk concentration, considering their
interrelation and reciprocal influence;
- To
use professional (qualitative) judgment based on conservative approaches at all
stages of risk management, to estimate losses adequately, including potential
tosses, taking into account the profile and risk level, and also long term
conditions of the market environment; to use for these purposes modern methods
of risk estimation, including stress-testing;
-
To take measures on developing work directed at forming databases, which
are necessary for risk estimation, by using modern approaches, including
mathematical statistics and probability theory;
- To
implement into practice development of plans and measures providing continuity
of bank activity in unforeseen situations. To base the given work on carrying
out expert estimations and self-estimations of risk level, condition of
corporate governance, risk management, internal control, information security;
-
To pay special attention to risk management questions (including legal
and reputational), to fast-growing segments of the
banking services market and financial market and also to consumer crediting.
3.
To the credit institutions, which are the Heads of banking groups,
parent organizations (managing companies) bank holdings to improve procedures
of risk management and capital sufficiency, based on up-to-date approaches to
risk-management, also reflected in the recommendations of the Basel Committee
on banking supervision.
4.
To raise diversification of the resource base, including perfection of
tools of money resources attraction, to strengthen attention to the estimation
of the condition of liquidity, especially in case of considerable volumes of
borrowings abroad and on the interbank market.
5.
To take measures directed at increasing efficiency of the functioning of
the interbank credit market to promote development of
its organizational and technical infrastructure.
6.
To take steps on accelerating joining the system of banking electronic
urgent payments — BESP
system of Bank of Russia, give preference to the direct form of participation
in comparison with associated in order to have the possibility to use the full
list of services given to direct participants of calculations by BESP system.
7.
To strengthen attention to issues of accounting and reporting
reliability, including consolidated, to raise transparency of activity by extension
of structure and efficiency of information published by credit institutions on
their activity, also on the Internet (on their own websites, also on the
website of the Bank of Russia).
8.
To continue developing corporate ethic standards, quality standards of
banking activity and control mechanisms over their observance, paying special
attention to the quality of developing standards to promote their voluntary
implementation into banking practice, simultaneously to halt the growth of
unjustified load on banks. To banking associations to
investigate the issue of the expediency of developing a typical contract for
consumer credit.
9.
To improve forms and methods of disclosing information to the user of
banking services, first of all to the public.
10.
To take a part in programs to increase the financial literacy of the
population. To the Bank of Russia:
1.
To develop Regulatory Acts directed:
1.1.
at implementation of international approaches
to estimation of the capital sufficiency of credit institutions specified
within the limits of the agreement «International Convergence of Capital Measurement and
Capital Standards: a Revised Framework» (Basel II), regarding Component 1 «Minimum Capital Requirements».
Together with the banking
community to prepare drafts on regulatory documents on Component 2 (Supervisory
Review Process) and to Component 3 (Market discipline). To provide implementation of principles of proportionality within
the limits of Components 2 and 3 of Basel II.
1.2.
On implementation of the concept of monetary flows into the regulation
system of risk liquidity.
2.
To evolve risk-oriented supervision:
- Aimed
at identification of the most significant risks in credit institution activity
and prevention of problems at an early stage of their occurrence (proactive
supervision);
-
Based on the combination of quantitative and qualitative (professional,
substantial) approaches to risk estimation in credit institutions;
-
Combining macroprudential estimations of
system stability with questions of stability and risks of banking groups and
separate banks;
-
From the point of view of the supervision toolkit based on a combination
of distance analysis with inspection and regular contacts (through the
Institute of Curators) with the management board and bank personnel on risk estimation,
also on perspectives.
3.
To improve the system of tools of monetary and credit regulation in
providing access for all financially stable credit institutions.
4.
To continue implementation of the procedure for maintenance of effective
functioning and further development of the system of banking electronic urgent
payments (BESP system of Bank of Russia).
5.
In order to optimize the structure, volumes and terms of banks providing
all kinds of reporting to provide:
5.1. Reflect in the reporting the character and
real risk level accepted by the credit institutions, meaning the possibility of
using such information also for risk management.
5.2.
Implementation of the unified formats of gathering of reporting for the
credit institutions (draft on creation of Uniform information system for
support of the Bank of Russia's activity on regulation and development of the
banking sector).
6.
To raise efficiency of information interaction with the state authorities
responsible for stability of the financial sector carrying out the function of
control and supervision in the financial and economic sphere, including, in
order to reduce volumes and streams of information
represented by credit institutions in the various state institutions, excluding
duplicating reporting.
7.
To implement a system of differentiated conditions of supervision over
banks and differentiations of reporting modes, taking into account the
estimation of their economic situation, based on distinctions of intensity of
distance supervision (including volume and mode of provided reporting)
depending on the financial stability of credit institutions and its role from
the point of view of system stability.
8. To
continue work on development, within the limits of the current legislation, of
consolidated supervision, including transboundary,
including analysis and estimations accepted by banking/consolidated groups and
banking holdings of risks on a consolidated basis.
9.
In order to perfect transboundary banking
supervision to expand interaction with supervising bodies of foreign countries,
also on the basis of concluded cooperation agreements on supervision.
10.
To consider the possibility of expansion of interaction with auditor
institutions concerning credit institution activity and banking/consolidated
groups taking into account international recommendations.
11.
To continue work on development of approaches to estimation of
concentration of credit risks on operations and transactions of credit
institutions with the counterparts (borrowers) connected with them, groups of
the interconnected counterparts, and also by kind of economic activities and on
territorial cut.
12.
To continue the work directed at improvement of quality of the capital
of the credit institutions and exclusion of fictitious capital in the banking
sector.
13.
To consider the issue of the character of requirements to formation of
reserve on possible losses taking into account domestic and foreign experience
and recommendations of international experts.
14.
To continue work on checking of compliance by banks of requirements on
bringing to borrowers notice information on the full cost of credit.
15.
To continue carrying out complex estimation of financial stability of
the banking sector on the basis of regular monitoring of the state of the basic
banking risks, calculation and analysis of indicators recommended by IMF of
financial stability, stress-testing methods.
16.
To continue the publication of information on the state of the banking
sector, banking supervision, also on the website of the Bank of Russia on the
Internet. To consider the issue on the possibility of further expansion of
published information.
17.
To develop approaches to increasing the financial literacy of the
population, to consider the issue of opening on the Bank of Russia's website a
separate part dedicated to general group of professionally unprepared users of
different age categories.
To Legislative Authorities of the Russian
Federation, the Government of the Russian Federation, Executive authorities
with the participation of the Bank of Russia:
1.
In order to further develop the national banking system, increase the
stability and competitiveness of banks, to make active efforts on modification
of the current legislation and preparation of drafts law providing:
1.1.
In the sphere of capitalization of credit institutions
- Simplification
of procedures of reorganization of credit institutions with simultaneous
increase of their transparency and maintenance of appropriate protection of
interests of creditors of reorganized credit institutions;
-
Perfection of procedures of placing banks securities taking into account
the interests of investors while preserving mechanisms of control over the
quality of invested capital;
- Creation
of mechanisms providing the possibility of investing the means of state
institutes for development into capital of credit institutions;
1.2.
In the sphere of banking activity development
-
Maintenance of terms for unification and development of system for
property and property rights registration;
- Simplification
of levy of execution on pledges;
-
Fixing the possibility of pledge of money resources in a bank account;
- Formation
of legal terms for more effective attraction by banks of Federal Mail Service
Institutions and other institutions for implementation on a contractual basis
of the separate functions on implementation of banking operations;
-Further legislative regulation of consumer
crediting, regulating the whole complex of mutual relations arising in this
sphere between market participants and regulating bodies;
-
Creation of legal terms for development of the education credit system,
increase of availability of education credits for citizens of the Russian
Federation;
1.3.
On the implementation of international recognized approaches to risk
management, banking regulation and supervision
- Creation
of legal conditions for comprehensive implementation in the Russian Federation
of Basel Committee Regulations on banking supervision «Basic principles of effective
banking supervision»
and «International
Convergence of Capital Measurement and Capital Standards: A Revised Framework» (Basel II);
-
Perfection of legal terms for realization of modern approaches to an
estimation of risks, including issues on risk concentration;
-
Perfection of legal conditions for implementation of consolidated
supervision and risk management on consolidated basis, including possibilities
of exchange of confidential information within the limits of banking groups and
between banking supervision bodies;
- The
establishment of definition criteria of real owners of credit institutions and
the order of information disclosure;
-
Concrete definition of qualifying requirements for officials of credit
institutions and members of Board of Directors (supervisory board) of credit
institutions granting to Bank of Russia the right to define criterion of
estimation of their business reputation;
- The
establishment of requirements for all affiliated persons of business companies
on the presentation to the companies of information and responsibility of
affiliated persons for unrecorded information;
- Strengthening
of the role and increasing the responsibility of the Board of Directors
(supervisory board) of the credit institutions:
- Creation
of a mechanism of asset realization of liquidated credit institutions, increase
of transparency of liquidating procedures, perfection of procedures of
contesting doubtful transactions, including providing the right to the Deposit
Insurance Agency to challenge actions of debtors of the credit institutions;
- Creation
of legal preconditions for information interchange
between the banking supervision body and banking auditors;
1.4.
On financial market development
-
Maintenance of legislative conditions of regulation of procedures of
securitization financial assets and development of derivatives market;
- Definition
of legislative conditions of creation and the order of confidential asset management
of the banking management's General funds;
1.5.
On perfection of the refinancing system
- To
allocate the Deposit Insurance Agency the authority to organize public auctions
for realization of subjects of pledge (assets) under outstanding credits of the
Bank of Russia, not circulating in the Russian Federation on the organized
market (bills, the rights to claim under credit contracts), taking as a pledge
under the given credits,
2.
In order to reduce banks administrative costs to take the decision on
releasing them from the duty of controlling fulfillment by institutions of the
rules of conducting cash operations.