Central Bank develops bill on regional banks
The Russian Central Bank has developed a bill that introduces a new type of credit organization – the regional bank, which will in fact be instrumental in bringing about a two-tier banking system in Russia – at the federal level and at the level of the Russian regions.
According to the bill, regional bank status will be available to credit organizations with assets not exceeding 7 billion rubles, and regional banks will be able to perform banking operations only in the Russian region where the permanent office of the regional bank is located, as well as in bordering Russian regions.
The exact list of Russian regions in which a regional bank is entitled to carry on its activity will be indicated in the license of the regional bank.
The amount of the regional bank’s charter capital must be at least 300 million rubles as of the day it applies for state registration and banking license.
It important to note that under the bill, regional banks cannot perform trans-border banking operation or service non-residents, and all their interbank operations will need to be performed through a central contracting party.
At the same time, regulation for regional banks will be simpler, in particular:
- Only five of the mandatory bank norms will apply:
- Two norms on sufficient equity – aggregate and fixed capital;
- One norm on current liquidity;
- Two norms on concentration of credit risk – per one borrower and per entity affiliated with the bank.
- Simpler requirements for disclosing information: a simplified form for calculating capital, risk management information in IFRS format and others.
It should be noted that according to the bill and the relevant explanatory note, there are plans to increase the minimum amount of charter capital for federal banks from 300 million to 1 billion rubles, to gradually implement international standards of the Basel Committee on Banking Supervision, which set higher requirements for a bank’s financial solvency.
The Russian Central Bank presumes that the transition to a two-tier banking system will take two years.
It is expected that less regulation will lower the cost of services provided by regional banks, and will ensure proportionate control over regional and federal level banks.
We assume that the introduction of the system of regional banks is also a good possibility for trade organizations to establish banking structures for purposes of developing a system of crediting clients/buyers.
We will monitor the legislative process concerning regional banks and will write about further news in this area.
Should any questions arise in connection with the above or if you need any additional materials, please contact Dmitry Churin or Ekaterina Chernenkova, Office of Capital Legal Services.
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