Bank of Russia improves NFI licence revocation procedures

The regulator has elaborated a concept for the improvement of the procedure to cancel (revoke) licences of non-bank financial institutions (NFIs). It incorporates the principles of awareness and competitiveness applied in a number of countries.

International practice shows that an authorised agency responsible for licence issue and revocation is governed by two principles when it decides on a licence cancellation. The first one is competitiveness, that is, the right of a licence holder to participate in the procedure under which the licence revocation is considered. The second principle is awareness, that is, the right of an institution to be aware of the launch of the licence revocation procedure and the obligation of the authorised agency to communicate the launch of such procedure.

In Russia, NFIs’ right to make objections or remarks on the inspection findings underlying the cancellation decision is stipulated in the Bank of Russia’s regulation. However, Russian law also allows for decision-making based on the findings of an off-site supervision, which rules out the possibility for institutions to prepare and submit objections and remarks. Moreover, the Bank of Russia is not obliged to inform a number of NFIs on the execution of (discontinuation of supervision over compliance with) previously issued instructions on addressing violations.

The Bank of Russia plans to expand its supervision with information NFI briefing, including information sharing on the execution of the regulator’s instructions on addressing violations, posting press releases on the regulator’s website on the decisions related to cancelling licences of NFIs and violations committed, and communication of supervisory inspections to NFIs.

The planned events will allow licence holders to promptly estimate the risks of supervisory measures which may be initiated by the Bank of Russia against them, and to provide their objections and remarks.