Memorandum of Understanding between the Central Bank of the Russian Federation (Bank of Russia) and the Central Bank of Egypt
The Central Bank of the Russian Federation (Bank of Russia) and the Central Bank of Egypt (CBE), hereinafter referred to as the “Banking Supervisory Authorities”, have reached an understanding on the need to exchange information for the effective fulfillment of their functions and assist the reliability and stability of banking systems in their countries. This understanding also meets the Basel Committee recommendations on the principles of conducting consolidated and comprehensive supervision and co-operation between the Banking Supervisory Authorities.
1. The Powers of the Banking Supervisory Authorities
1.1 The Russian Federation
Under the Federal Law On the Central Bank of the Russian Federation (Bank of Russia), the Bank of Russia is a body of banking regulation and banking supervision. It constantly monitors the compliance by credit institutions and banking groups (banking holdings) with banking legislation, the Bank of Russia’s regulations and mandatory standards. To fulfill its regulatory and supervisory functions, the Bank of Russia conducts on-site inspections to eliminate the shortcomings discovered in their work and takes measures related to credit institutions established by the Federal Law on the Central Bank of the Russian Federation ( Bank of Russia).
1.2 Arab Republic of Egypt
Under Law 88 for 2003 on the Central Bank, Banks, and Foreign Exchange (the Banking Legislation), the CBE is an autonomous body vested with the power and authority to supervise and regulate banking and financial institutions under its jurisdiction, which include all banks operating in Egypt, foreign exchange dealing companies, and credit bureaus. The CBE constantly monitors the compliance of banks and such other institutions with the Banking Legislation, the CBE regulations and mandatory standards. To fulfill its regulatory and supervisory function, the CBE, among others, conducts on-site inspections and takes measures to eliminate any shortcomings or violations by banks and other institutions established in accordance with the Banking Law or subject to its jurisdiction.
2. Concepts and Definitions
For the purposes of this Memorandum, the concepts mentioned below will have the following meanings:
2.1 “Supervised Banking Institution” a legal entity authorized to conduct banking operations, whose activities are subject to licensing and banking supervision in accordance with the Banking Legislation of the Russian Federation or the Arab Republic of Egypt.
2.1.1 In the Russian Federation
Credit institution is a legal entity which, for the purpose of deriving profit as the principal objective of its activity, has the right on the basis of a special permission (license) of the Bank of Russia to conduct banking operations stipulated by the Federal Law on Banks and Banking Activities. A credit institution is established on the basis of any form of ownership as a business entity.
Bank is a credit institution that has the exclusive right to conduct the following banking operations in their entirety: to take funds on deposit from private individuals and legal entities, lend such funds on its own behalf and at its own expense on the condition that they are returned after a specified period of time with an interest, open and keep individual and corporate bank accounts.
Non-bank credit institution is a credit institution that has the right to conduct individual banking operations stipulated by the Federal Law on Banks and Banking Activities. The permissible combinations of banking operations are established for non-bank credit institutions by the Bank of Russia.
2.1.2 In the Arab Republic of Egypt:
A Bank is an institution that is licensed by and registered with the CBE to conduct banking operations and activities in accordance with the Banking Legislation. For this purpose, a Bank under Banking Legislation may take the form of an Egyptian joint stock company or a branch of a foreign bank duly registered with the CBE.
A Representative Office of a non Egyptian bank is a separate division thereof registered with the CBE as a representative office that represents and protects its interests in Egypt. Such representative office has no right to conduct banking operations and is merely authorized to act as a liaison office. A representative office of a bank is not a legal entity and may not conduct any commercial or banking activities.
2.2 “Parent Supervised Institution” a supervised institution incorporated in one of the countries, which has a Cross-Border Establishment (a branch, a subsidiary or a representative office), located in the other country.
2.3 “Cross-Border Establishment”
2.3.1 The Russian Federation
In the Russian Federation, foreign banks may participate in the authorized capital of credit institutions and establish subsidiaries, whose activities are subject to licensing under the Russian Federation federal laws, and also open representative offices.
Under the Russian Federation legislation:
A subsidiary credit institution is a legal entity in which another credit institution has majority interest and in accordance with an agreement concluded between them or otherwise can determine the decisions taken by the subsidiary credit institution.
A representative office of a credit institution is a separate division thereof, situated outside the seat of the credit institution that represents and protects its interests. A representative office of a credit institution has no right to conduct banking operations. A representative office of a credit institution is not a legal entity and conducts its activities on the basis of the regulations established by the credit institution that created it.
2.3.2 In the Arab Republic of Egypt
Under the Banking Legislation, foreign banks may participate in the issued capital of Egyptian Banks without a maximum limit, subject to the approval of the CBE if such participation reached 10% or more of the capital of such Bank.
Moreover, foreign banks may establish an Egyptian Bank or register a branch of their foreign bank in Egypt, subject to obtaining a license from the CBE.
Further, foreign banks may establish a Representative Office subject to the approval of the CBE, in accordance with the Banking Legislation.
2.4 “Home Country Supervisor”: the Banking Supervisory Authority located in the Russian Federation or in the Arab Republic of Egypt, respectively, in which a Parent Supervised Institution is registered.
2.5 “Host Country Supervisor”: the Banking Supervisory Authority located in the Russian Federation or in the Arab Republic of Egypt , respectively, in which a Cross-Border Establishment of a Parent Supervised Institution is registered.
3. Sharing Information
3.1 The Banking Supervisory Authorities recognize that closer communications between Home and Host Countries Supervisors would be mutually advantageous.
3.2 Co-operation within the framework of this Memorandum shall be conducted at the initiative of a Banking Supervisory Authority on the basis of a request for assistance.
3.3 A request for assistance shall be made in writing. Any type of communication facilities may be used to transmit a request.
3.4 Assistance within the framework of this Memorandum may be refused wholly or in part if the requested Banking Supervisory Authority contravenes its national legislation or runs counter to the interest of the state. In this case, the requesting Banking Supervisory Authority shall be notified in writing and given the reasons for the refusal.
3.5 The Banking Supervisory Authorities shall:
— exchange public information on the state and development of the national banking sector, the principal banking supervision standards and requirements and significant changes in the procedures and legislation therein;
— notify the other Banking Supervisory Authority and provide relevant information regarding any material developments or supervisory concerns in respect of the operations in one of the countries of a Supervised Banking Institution registered in the other country;
— provide each other with information necessary for identifying the real owners of a Supervised Banking Institution;
— notify each other without delay of applications of Supervised Banking Institutions registered in one country for approval to establish a Cross-border Establishment or to acquire shares (stakes) in a Supervised Banking Institution in the other country. Upon request, the Home Country Supervisor will provide the Host Country Supervisor with information necessary to make a decision on such an application;
— upon the receipt of the application, the Host Country Supervisor shall inform the Home Country Supervisor about its contents, and after consideration of the application shall inform such Home Country Supervisory in writing about its results.
If the applicant Supervised Banking Institution receives the permission to establish a Cross-border Establishment, this Memorandum of Understanding shall be amended in order to establish procedures for the sharing of information also in such fields as on-going supervision and on-site inspections.
3.6 Each Banking Supervisory Authority shall do everything possible to ensure a prompt and fullest possible reply to the request of the other Banking Supervisory Authority or it shall notify the latter about the circumstances that prevent or delay the fulfillment of the request.
3.7 Each Banking Supervisory Authority shall bear the expenses that may arise in implementing this Memorandum unless a different procedure is agreed upon.
4. Co-operation related to the prevention and countering money laundering and terrorist financing
4.1. Within the framework of co-operation in order to increase efficiency of banking supervision and transparency of the Supervised Banking Institutions, the Banking Supervisory Authorities shall exchange the following information on:
— laws and regulations related to the prevention and countering of money laundering and terrorist financing, which fall within the competence of the Banking Supervisory Authorities, as well as about changes in laws and regulations;
— the best practice of clients identification and verification related to money laundering and terrorist financing transactions;
— money laundering and terrorist financing typologies and methods (operations);
— violations of Banking Legislation and legislation on anti-money laundering and terrorism financing committed by Supervised Banking Institutions and sanctions used against them.
5. Other Provisions
5.1 If necessary, the Banking Supervisory Authorities shall meet to discuss and settle matters relating to the implementation of this Memorandum.
5.2 To ensure the efficient implementation of co-operation after this Memorandum comes into force, the Banking Supervisory Authorities shall exchange lists of contact persons (with full names, job titles, telephone and fax numbers and e-mail addresses).
5.3 Information on the Bank of Russia, banking system, laws and regulations of the Russian Federation may be found on the Bank of Russia website at www.cbr.ru.
Information on the CBE, the Banking Legislation, regulations of the CBE may be found on the CBE website at www.cbe.org.eg.
The Bank of Russia and the CBE shall not object to placing this Memorandum on their respective websites.
5.4 This Memorandum shall come into force as of its signing and it will remain effective until one of the Banking Supervisory Authorities notifies in advance the other in writing about its decision to terminate it.
5.5 This Memorandum is made in two copies, in the English language.