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AGREEMENT between the Central Bank of the Russian Federation (Bank of Russia) and the National Bank of the Republic of Azerbaijan on Co-operation in the Field of Banking Supervision of Credit Institutions

Informal translation

The Central Bank of the Russian Federation (Bank of Russia) and the National Bank of the Republic of Azerbaijan, hereinafter referred to as the ‘banking supervisory authorities,’ expressing their mutual interest in establishing and promoting bilateral ties in the field of banking supervision and seeking to achieve mutual understanding on matters relating to banking regulation and co-operation in supervising credit institutions, have agreed as follows:

Article 1. The Powers of the Banking Supervisory Authorities

1.1. The Russian Federation

Under the law of the Russian Federation, the Central Bank of the Russian Federation (Bank of Russia) is the banking regulation and supervision authority. The Bank of Russia constantly monitors the observance by credit institutions and banking groups (bank holding companies) of banking legislation and Bank of Russia rules and regulations and mandatory requirements. To fulfil its regulatory and supervisory functions, the Bank of Russia conducts on-site inspections of credit institutions and their branches, sends them compulsory prescriptions to rectify the faults discovered in their work and takes action against credit institutions pursuant to the Federal Law on the Central Bank of the Russian Federation (Bank of Russia). The Bank of Russia may request and receive from credit institutions information about their activities and demand clarification of this information.

1.2. The Republic of Azerbaijan

Under the law of the Republic of Azerbaijan, the National Bank of the Republic of Azerbaijan is the banking regulation and supervision authority. The National Bank of the Republic of Azerbaijan constantly monitors the observance by credit institutions of banking legislation and the rules, regulations and mandatory requirements established by the National Bank of the Republic of Azerbaijan. To fulfil its regulatory and supervisory functions, the National Bank of the Republic of Azerbaijan conducts on-site inspections of credit institutions and their branches and representative offices, including the branches and representative offices of foreign banks and their subsidiaries, sends them compulsory prescriptions to rectify the faults discovered in their work and takes action against credit institutions pursuant to the Republic of Azerbaijan Laws on the National Bank of the Republic of Azerbaijan and on Banks. In the course of inspection of banks and their subsidiaries, the National Bank of the Republic of Azerbaijan may request any information about management and the on-going activities of the persons holding a major stake in a bank and all other persons involved with the bank.

Article 2. For the Purposes of this Agreement

2.1 A credit institution

2.1.1. In the Russian Federation:

is a legal entity that has the right to conduct banking operations under the Federal Law on Banks and Banking Activities for the purpose of deriving profit as the principal objective of its activity on the basis of a special permission (licence) issued by the Bank of Russia. A credit institution is established on the basis of any form of ownership as a business entity;

a bank is a credit institution that has the exclusive right to conduct all of the following banking operations: take individual and corporate funds on deposit, invest these funds on its own behalf and at its own expense on a repayable and chargeable basis for a specified term and open and manage individual and corporate bank accounts;

a non-bank credit institution is a credit institution that has the right to conduct some banking operations pursuant to the Federal Law on Banks and Banking Activities. The Bank of Russia determines permissible combinations of banking operations for non-bank credit institutions.

2.1.2. In the Republic of Azerbaijan:

a bank is a legal entity that takes deposits or other repayable funds from private individuals and legal entities, extends loans on its own behalf and at its own expense and conducts transfers and cash settlement operations at the instruction of its customers;

a non-bank credit institution is a legal entity extending loans from its own funds and/or raised funds (except deposits).

2.2. Cross-border establishments

2.2.1. In the Russian Federation, foreign credit institutions may participate in the authorised capital of credit institutions and set up subsidiaries that must be licensed under the Russian Federation law and open representative offices.

Under the Russian Federation law:

a subsidiary credit institution is a legal entity in which the parent credit institution can determine decisions due to holding a majority stake in the authorised capital or pursuant to an agreement concluded between them or otherwise;

a representative office of a credit institution is its separate division located outside the seat of the credit institution and representing and protecting its interests. The representative office of a credit institution has no right to conduct banking operations. The representative office of a credit institution is not a legal entity and operates in compliance with the regulation approved by the credit institution that established it.

2.2.2. In the Republic of Azerbaijan, foreign credit institutions may participate in the authorised capital of credit institutions and open subsidiaries and branches and representative offices whose operations are subject to licensing and/or permission issued pursuant to the law of the Republic of Azerbaijan.

Under the law of the Republic of Azerbaijan:

a subsidiary bank is a bank with an authorised capital in which the parent bank or bank holding company has more than 50 per cent of voting shares, or a bank which has concluded an agreement with the parent bank or bank holding company whereby the parent bank or bank holding company exerts significant influence on the decisions taken by the subsidiary bank;

a representative office of a bank is a separate division of a bank, which is located outside the seat of the bank, is not a legal entity, has no right to conduct banking operations and only represents and protects the interests of the bank;

a branch of a bank is a separate division of a bank, which is located outside the seat of the bank, whose liabilities are the responsibility of the bank and which can conduct all or some of the banking operations permitted to the bank.

2.3. A parent credit institution is a legal entity that has a cross-border establishment (a subsidiary, a branch or a representative office).

2.4. Home country is a country where a parent credit institution is registered.

2.5. Host country is a country where a cross-border establishment is registered.

Article 3. Information Sharing

3.1. To maintain stability and facilitate the development and consolidation of the national banking systems of the Russian Federation and the Republic of Azerbaijan, the banking supervisory authorities co-operate in supervising parent credit institutions and their cross-border establishments pursuant to this Agreement and in compliance with the requirements of their national legislation.

The banking supervisory authorities inform each other about the state and development of the banking sector, the main requirements of their national legislation in the field of banking supervision and the changes made to it.

3.2. In the Russian Federation, the sharing of information with foreign banking supervisory authorities, including issues relating to confidentiality of information, is regulated by the Federal Law on the Central Bank of the Russian Federation (Bank of Russia). Pursuant to Article 51 of the Federal Law on the Central Bank of the Russian Federation (Bank of Russia), the Bank of Russia may request from the National Bank of the Republic of Azerbaijan information or documents received from credit institutions in the course of supervision and pass to the National Bank of the Republic of Azerbaijan such information or documents that do not contain data on operations conducted by credit institutions and their customers, provided that the National Bank of the Republic of Azerbaijan ensures the information security regime conforming to the information security requirements established by the Russian Federation law for the Bank of Russia.

As regards the information and documents received from the National Bank of the Republic of Azerbaijan, the Bank of Russia must comply with the requirements for the disclosure of information and the submission of documents established by the Russian Federal law, bearing in mind the requirements established by the law of the Republic of Azerbaijan.

3.3. In the Republic of Azerbaijan, the sharing of information with foreign banking supervisory authorities, including issues relating to confidentiality of information, is regulated by the Laws of the Republic of Azerbaijan on the National Bank of the Republic of Azerbaijan and on Banks, which stipulate that the National Bank of the Republic of Azerbaijan has the right to request from the Bank of Russia information or documents received from credit institutions in the course of supervision and pass to the Bank of Russia information or documents received from credit institutions in the course of supervision and not containing data on operations conducted by credit institutions and their customers, provided that the Bank of Russia ensures the information security regime conforming to the information security requirements established by the law of the Republic of Azerbaijan for the National Bank of the Republic of Azerbaijan.

As regards the information and documents received from the Bank of Russia, the National Bank of the Republic of Azerbaijan must comply with the requirements for the disclosure of information and the submission of documents established by the law of the Republic of Azerbaijan, bearing in mind the requirements established by the law of the Russian Federation.

3.4. The banking supervisory authorities meet whenever necessary to discuss issues of mutual concern and ways to improve banking supervision of parent credit institutions and their cross-border establishments.

3.5. Co-operation within the framework of this Agreement is conducted on the initiative of one of the banking supervisory authorities upon a request for assistance in conducting banking supervision.

3.6. A request for assistance is made in writing. Any means of communication may be used to transmit a request.

3.7. A request for assistance pursuant to this Agreement may be rejected wholly or partly if the requested banking supervisory authority believes that the fulfilment of this request will contravene its national legislation.

3.8. Each banking supervisory authority takes all the necessary measures to ensure that the request of the other banking supervisory authority is answered promptly and to the fullest possible extent or notifies the latter about the circumstances that have prevented or delayed the fulfilment of the request.

3.9. Each banking supervisory authority covers on its own the expenses involved in implementing this Agreement unless another procedure is agreed upon.

Article 4. Ensuring the Confidentiality of Information

4.1. The banking supervisory authorities take the appropriate measures to ensure confidentiality of information or documents when keeping, using or passing them to each other by any means of communication.

4.2. The banking supervisory authorities will share information in the field of supervision, provided that this information is used for supervisory purposes only and is not passed to third persons without the consent of the banking supervisory authority that has provided information, except for the cases when this is required by national legislation.

Article 5. Co-operation in Issuing Licences (Permissions) to Cross-border Establishments

5.1. The application by a credit institution registered in the home country for a licence (permission) to open a cross-border establishment, made to the host country banking supervisory authority, is considered within the time periods and in compliance with the requirements established by national legislation.

5.2. The host country banking supervisory authority that has received the application indicated in point 5.1 of this Agreement notifies the home country banking supervisory authority of its contents and the results of the examination of this application.

5.3. To pass a decision in respect to the application indicated in point 5.1 the home country banking supervisory authority presents at the request of the host country banking supervisory authority the following information on a credit institution pursuant to national legislation:

— the state registration date;

— licensed banking operations;

— members of the management bodies of a parent credit institution and information on shareholders (members), subsidiaries, branches, representative offices and affiliated persons;

— the corporate governance and internal control system, including information on the internal control system for the purpose of countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism;

— other information necessary for taking a decision on the opening of a cross-border establishment that may be passed within the framework of this Agreement.

5.4. The banking supervisory authorities notify each other in writing about the decision taken on the issue of licences (permissions) to open a cross-border establishment.

Article 6. Co-operation in Taking Decision to Agree Acquisition of Shares (Stakes) in a Credit Institution

6.1. The banking supervisory authorities co-operate in taking a decision to agree the acquisition by a legal entity or private individual or a group of legal entities and (or) private individuals of shares (stakes) in a credit institution registered in the other country.

6.2. The acquisition of shares (stakes) in a credit institution registered in the Russian Federation or the Republic of Azerbaijan signifies a transaction that under the national legislation of the corresponding country has to be preliminarily agreed with the banking supervisory authority.

Article 7. Co-operation in On-going Supervision of Cross-border Establishments

7.1. The host country banking supervisory authority supervises cross-border establishments pursuant to national legislation.

7.2. The host country banking supervisory authority will not prevent cross-border establishments passing to the parent credit institution information and statements necessary for consolidated supervision of credit institutions and the compiling of consolidated statements in forms established by the home country.

7.3. The home country banking supervisory authority in respect to parent credit institutions and the host country banking supervisory authority in respect to cross-border establishments provide on a reciprocal basis upon request the following information, provided that this information is not confidential under national legislation:

— on indicators reflecting the financial condition of parent credit institutions and their cross-border establishments;

— on major violations of banking legislation, including the law on countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism, committed by parent credit institutions and their cross-border establishments;

— on measures taken by the banking supervisory authorities against a parent credit institution or its cross-border establishments.

Article 8. Co-operation in Conducting On-site Inspections

8.1. The home country banking supervisory authority regulates on its own the relations with cross-border establishments as regards the access of its authorised representatives for the purpose of conducting an inspection.

8.2. The home country banking supervisory authority notifies the host country banking supervisory authority no later than 25 (twenty-five) working days before the beginning of the planned inspection about its intention to conduct an inspection, indicating the name of the cross-border establishment, the period to be inspected, the purposes of the inspection and its duration, the inspectors’ names and the procedure for passing information on inspection results to the host country banking supervisory authority.

Article 9. Co-operation in Countering the Legalisation (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism

9.1. For the purposes of supervision, the banking supervisory authorities share information:

— on the requirements of the law and other regulations in respect to countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism;

— on the practice of identifying and scrutinising customers and beneficiaries and detecting operations connected with the legalisation (laundering) of criminally obtained incomes and the financing of terrorism;

— on the observance by parent credit institutions and their cross-border establishments of the law on countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism.

Article 10. Other Provisions

10.1. Should changes be made to the laws of the Russian Federation and the Republic of Azerbaijan, the corresponding changes may be made to this Agreement.

10.2. Any differences that may arise in connection with the implementation of the provisions of this Agreement are settled through consultation and negotiation.

10.3. This Agreement comes into force:

for the National Bank of the Republic of Azerbaijan—upon the completion of the necessary domestic procedures;

for the Bank of Russia—on the day the National Bank of the Republic of Azerbaijan will notify the Bank of Russia in the appropriate and unequivocal way about the completion of all the necessary domestic procedures for the entry into force of this Agreement.

This Agreement is effective until one of the banking supervisory authorities notifies the other in advance in writing about its intention to withdraw from it. In this case, this Agreement will remain in force for 30 days following the day the notification was received. The requests for assistance made prior to the notification date should be considered by the banking supervisory authorities pursuant to this Agreement.

10.4. Information on the Bank of Russia and credit institutions registered in the Russian Federation and laws and regulations are available in the Bank of Russia official publication The Bank of Russia Bulletin and on the Bank of Russia website at www.cbr.ru.

Information on the National Bank of the Republic of Azerbaijan and credit institutions registered in the Republic of Azerbaijan is available on the website of the National Bank of the Republic of Azerbaijan at www.nba.az.

The Bank of Russia and the National Bank of the Republic of Azerbaijan have no objection to this Agreement being placed on their websites for public use.

10.5. Should this Agreement be terminated, supervisory information received pursuant to this Agreement will continue to be considered confidential.

10.6. This Agreement was signed in the city of Baku on 4 December 2006 in four copies, two in the Russian language and two in the Azerbaijanian language, all of them being equally authentic.

For the Central Bank
of the Russian Federation

O.V. Mozhaiskov

Deputy Chairman
of the of the Central Bank
of the Russian Federation

“04” December 2006

For the National Bank
of the Republic of Azerbaijan

E.S. Rustamov

Chairman of the Board
of the National Bank
of the Republic of Azerbaijan

“04” December 2006
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Last updated on: 29/10/2018