Proportional banking regulation in action

A new law — Federal Law No. 92-FZ, dated 1 May 2017, ‘On Amending Certain Laws of the Russian Federation’ — has come into force. It envisages the introduction of proportional regulation designed to set up a regulatory balance for banks differing in scale and in the nature of operations. Differentiation in regulatory approaches to credit institutions and requirements for the transitional period are specified in the presentation.

It will take a year and a half to rank credit institutions with a universal or base licence by capital size. Banks with base licences will be able to conduct banking operations and deals not covered by the licence till the expiry of prior agreements, but not longer than 5 years, and to conduct operations under credit agreements within their initial validity term. The transitional period will allow banks and their customers to adapt to the new business environment, and will foster competition in the domestic banking sector.

Once the law comes into force on 1 June 2017, all banks will be qualified as banks with universal licences, irrespective of their capital size. The status will be assigned automatically, but credit institutions’ licences will not be subject to automatic replacement. The status change procedures for banks with universal licences and capital below 1 billion rubles to banks with base licences shall be completed by 1 January 2019. The status change process is similar to the state registration of amendments to the charters of credit institutions.

If a bank changes its licence, the licence number shall remain unchanged and shall be identical to the bank's registration number assigned by the Bank of Russia. Base licences of banks will gain an additional letter “B”, which will be hyphenated after the licence number.