Bank of Russia unveils its personal savings guarantee scheme for shareholders in credit consumer cooperatives
The Bank of Russia has requested feedback from market players on its proposed package of measures designed to improve the protection of credit consumer cooperative (CCC) shareholders’ legal rights and interests, introduced in the consultation paper. The package is based on an assessment of the current financial service consumer guarantee schemes in the field of credit cooperation and their equivalents in certain advanced economies.
Of all financial market segments, credit cooperation has among the highest numbers of individual participants. CCCs rely on ‘contracts of transference of personal savings’ to attract households’ funds. However, the current guarantee schemes for shareholders in credit consumer cooperatives, consisting of credit cooperatives’ financial liability to their shareholders and their insurance coverage with insurance companies or mutual insurance associations, are not entirely sufficient to safeguard shareholders’ funds.
The newly created guarantee scheme will enable credit consumer cooperative shareholders to promptly recover their savings, to an established limit, if a credit cooperative fails.
Proposals include mandatory participation in the scheme for all CCCs attracting personal savings. Outside the remit of the regulation will be CCCs with less than 20 shareholders: these would have the option of voluntary participation in the scheme. Such CCCs will be obliged to notify their shareholders in writing that the guarantee scheme is not applicable to their contracts. All other CCCs failing to join the guarantee scheme will be banned from attracting household savings.
Reimbursement will be made out of a pooled guarantee fund, to be initially drawn on self-regulated CCCs’ indemnification funds. The guarantee fund could only be used to make indemnification payments or to meet liabilities under previous borrowings. As a separate measure, legislation will ensure that the funds will be immune from foreclosure.
A credit consumer cooperative’s board will be the highest governing body, with authority to set a cap on indemnification for personal savings, among other key governance matters. This board will be composed of representatives of CCCs, their self-regulatory organisations and the Bank of Russia.
A transition period of at least two years is envisaged, in which time CCCs will have to meet certain criteria to qualify for participation in the personal savings guarantee scheme.
The Bank of Russia welcomes any feedback, including responses to the questions in the consultation paper, before 28 August 2017.