Memorandum of Understanding between the Central Bank of the Russian Federation (Bank of Russia) and Rahoitustarkastus (the Finnish Financial Supervision Authority, FIN-FSA) concerning co-operation in banking supervision
The Central Bank of the Russian Federation (Bank of Russia) and Rahoitustarkastus (the Finnish Financial Supervision Authority, FIN-FSA), hereinafter referred to as the “Authorities”, in their capacity as the banking/prudential supervisors in the Russian Federation and Finland, have reached an understanding on the need to exchange information and co-operate for the effective fulfilment of their functions and to assist the reliability and stability of banking systems in their countries. This Memorandum of Understanding outlines the principles and procedures of information exchange and co-operation between the Authorities based on mutual trust and reciprocity. This information exchange and co-operation includes banks and credit institutions and their banking consolidation groups (bank holdings).
The Authorities aim to comply with the Basel Committee recommendations on the principles of conducting consolidated and comprehensive supervision and co-operation between supervisory authorities. The Authorities endeavour to ensure and enhance the efficiency of supervision.
1. The Powers of the Banking Supervisory Authorities
1.1. The Russian Federation
Under the legislation of the Russian Federation, the Bank of Russia is a body of banking regulation and banking supervision. It constantly monitors the compliance by credit institutions and banking groups (bank holdings) with banking legislation, the Bank of Russia’s regulations and mandatory standards. 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 eliminate the shortcomings discovered in their work and takes measures to credit institutions established by the Federal Law on the Central Bank of the Russian Federation (Bank of Russia).
As stated in the Act on the Financial Supervision Authority, the objective of the FIN-FSA is to promote financial stability and public confidence in the operation of financial markets. As the supervisor of the banking and securities markets, the FIN-FSA supervises the activities of the supervised entities and of other financial market participants, guides financial market participants to comply with good market practice and fosters public awareness of financial markets. In order to fulfill its mission, the FIN-FSA has the right to perform inspections on supervised entities, to receive all necessary documents and information for supervision and to issue regulations and orders.
2. Definitions for the Purposes of this Memorandum
2.1. “Supervised Institution”: a legal entity authorised to conduct banking operations, whose activities are subject to licensing and banking supervision in accordance with the legislation of the Russian Federation or Finland.
2.2. “Supervised Parent Institution”: a supervised institution incorporated in one of the states, which has a Cross-Border Establishment located in the other state.
2.3. “Cross-Border Establishment”: a subsidiary, a branch or a representative office of a Supervised Parent Institution incorporated in one of the states and operating in the other state in accordance with national legislation.
2.4. “Home Supervisor”: the Banking Supervisory Authority located in the Russian Federation or in Finland, respectively, in which a Supervised Parent Institution is registered.
2.5. “Host Supervisor”: the Banking Supervisory Authority located in the Russian Federation or in Finland, respectively, in which a Cross-Border Establishment is registered.
3. Exchange of Information
3.1. To ensure and enhance the efficiency of supervision over Supervised (Parent) Institutions and their Cross-Border Establishments, the Authorities express (by this document) their willingness and commitment to co-operate and exchange information openly on all matters related to the conduct of their duties. The exchange of information should be efficient and effective, and as spontaneous as possible, allowing either supervisor to take initiative, and should be provided on a timely basis. All essential information should be exchanged. Information shall be regarded as essential if it could materially influence the assessment of the financial soundness and integrity of the supervised institutions or which is likely to be relevant to the other Authority to assist that other Authority in the exercise of its functions. However, the exchange of information should be proportionate and risk-focused in order to avoid an unnecessary information flow.
3.2. The exchange of information can cover, inter alia, the following areas (list not exhaustive): licensing process (both issuance and revocation), fitness and properness issues, owner control, on-going supervision (including risk management issues), on-site inspections, financial crime, anti-money laundering and counter terrorist financing, and crisis situations. The exchange of information includes information received in the course of the discharge of the supervisory functions and may include in accordance with national legislation information covered by the bank secrecy.
3.3. In addition to the specific information on supervised institutions, the Authorities will also exchange information on the state and development of the national banking sector, the main banking supervision regulation and supervisory requirements and significant changes therein.
3.4. In the Russian Federation, the procedure of information-sharing with foreign supervisory authorities is regulated by the Federal Law on the Central Bank of the Russian Federation (Bank of Russia). According to Article 51 of this law, the Bank of Russia is entitled to inquire the central bank and the banking supervisory authority of a foreign state for information and documents received from credit institutions in the course of the discharge of the supervisory functions, and also has the right to submit to the banking supervisory authority of a foreign state the above information or documents which do not contain data on the individual transactions of credit institutions and their clients, under the condition that the said banking supervisory authority guarantees the regime for the preservation of information that corresponds to the demands for the provision of the security of information made on the Bank of Russia which are established by the legislation of the Russian Federation. As for the information and the documents received from the central banks and banking supervisory bodies of foreign states, the Bank of Russia is obliged to meet the requirements for revealing information and for submitting the documents established by the legislation of the Russian Federation, with due account of the requirements established by the legislation of these foreign states.
3.5. In Finland, the FIN-FSA is according to the Section 31 of the Act on the Financial Supervision Authority entitled to provide foreign supervisory authorities with information on a Finnish company belonging to a foreign consolidation group or financial conglomerate that is necessary for the supervision of the consolidation group or financial conglomerate. According to the Section 36 the FIN-FSA is entitled to disclose information to a foreign authority or undertaking which in its home country by virtue of law performs responsibilities similar to those of the FIN-FSA, provided that they are subject to secrecy obligations comparable to that of the FIN-FSA.
3.6. The FIN-FSA may not disclose confidential information received from the supervisory authorities of another state or obtained in the course of inspections undertaken in another state without the express consent of the supervisory authorities having provided the information or any other competent supervisory authorities of the foreign state in which the inspection was performed. Such information may be used solely for the performance of the responsibilities referred to in the Act, or for the purpose for which the consent was given.
3.7. The FIN-FSA shall, without delay, disclose to the Ministry of Finance and the Bank of Finland information in its possession on matters that, according to its judgement, may jeopardize financial stability or cause major disruptions in the operation of the financial system.
3.8. A request for official assistance shall be made in writing. Any type of communication facilities may be used to transmit a request.
3.9. Assistance within the framework of this Memorandum may be refused in full or in part if the requested Authority believes that the fulfilment of the request contravenes its national legislation or runs counter to the interests of the state (e.g. public interest or national security). In this case, the requesting Authority shall be notified in writing and given the reasons for the refusal.
4. Ensuring the Confidentiality of Information
4.1. The Authorities shall ensure the confidentiality of information or documents and professional secrecy by all employees who receive confidential information from the other Authority.
4.2. Confidential information provided within the framework of this Memorandum may be used only for supervisory purposes and distributed only to those employees within the Bank of Russia or FIN-FSA who need the information in their official duties.
4.3. Confidential information or documents shall not be passed to a third party without first obtaining the prior written consent of the Authority providing this information or documents and then only in accordance with the conditions attached by the providing Authority, except for the cases, when obligation to provide information or documents is stipulated by law.
4.4. If the Authority receiving information or documents is obliged by law to disclose confidential information received from the providing Authority to a certain third party, the receiving Authority will notify the providing Authority beforehand, if possible, and will co-operate in seeking to preserve as far as legally possible the confidentiality of such information or documents.
4.5. Should this Memorandum be terminated, the supervisory information received within the framework of this Memorandum shall remain confidential.
5. Licensing Process
5.1. Application of a Supervised Parent Institution to the Host Supervisor regarding issuing of licence (permission) on the opening of a Cross-Border Establishment (hereinafter — “application”) is considered within the time periods and in compliance with the requirements set by the national legislation.
5.2. Upon the receipt of the application, the Host Supervisor shall inform the Home Supervisor about its contents, and after consideration of the application shall inform in writing about its results.
5.3. The Home Supervisor shall inform the Host Supervisor whether the applicant complies with the national legislation (including Anti-Money Laundering and Prevention of Financial Crime regulations), as well as about the state of corporate governance, fitness and properness of owners and managers according to the national legislation, risk management and internal control system of the applicant Supervised Institution, on failure of the prospective managers of the Cross-Border Establishment to comply with the qualification requirements. The Home Supervisor shall also disclose information on the identification of beneficial owners within the framework of the national legislation.
5.4. The Authorities shall inform each other beforehand, if possible, about the decision to revoke the license of a Supervised Parent Institution or a Cross-Border Establishment.
6. Co-operation in Acquisitions
6.1. The Authorities shall consult each other before granting permission with regard to the acquisition of shares (stakes) by a legal entity or private individual or a group of legal entities and (or) private individuals in a Supervised Institution registered in the other country. In order to verify declarations made by Supervised Institutions or Cross-Border Establishments regarding ownership issues, the Authorities shall exchange information available to them. The Authorities will assist each other in performing the assessment and approval of the acquisition in accordance with national rules.
6.2. The Home Supervisor of the acquiring institution will assist (in accordance with the national legislation) the Host Supervisor of the acquired institution in its review of the acquisition (e.g. fitness and properness of the acquiring institutions’ owners and managers, capital adequacy and balance sheet of the acquiring institution and its business plans.)
6.3 For the purpose of this Memorandum, an acquisition signifies the purchase of a stake in the capital of a Supervised Institution of a size that will require, under the national legislation, supervisory permission of a respective Authority.
7. Co-operation in the On-going Supervision of Cross-Border Establishments
7.1. The Authorities will, in a timely manner, inform and discuss with each other any significant information on Supervised Institutions having Cross- Border Establishments in the other country which is likely to be relevant to the other Authority to assist that other Authority in the exercise of its duties.
7.2. The Authorities will also notify each other beforehand, if possible, of actions (including Anti-Money Laundering and Prevention of Financial Crime) against a Cross-Border Establishment as Host Supervisor or a Supervised Parent Institution as Home Supervisor if the information in their judgement is likely to be important to the other Authority to assist that other Authority in the exercise of its duties.
7.3. The Authorities will assist each other in issues connected with changes in the Board of Directors and senior management bodies of the Cross-Border Establishments.
8. Co-operation in Conducting On-Site Inspections
8.1. The Authorities agree that co-operation is useful in assisting each other in carrying out On-Site Inspections of Cross-Border Establishments and Supervised Parent Institutions. The Authorities will provide full informational and consultative support to each other in such inspections. The Home Supervisor may conduct an inspection visit to a Cross-Border Establishment in co-ordination with the Host Supervisor. Information requests to the Supervised Parent Institution must be channelled via the Home Supervisor. Host Supervisor must be informed of information requests to the Cross-Border Establishment.
8.2. The Authorities will notify each other in advance about the intention to conduct an On-Site Inspection, giving the names of the inspectors, the purpose of the inspection and its expected duration.
8.3. The Authorities shall inform each other on the results of the On-Site Inspections.
9. Co-operation in Financial Crime, Anti-Money Laundering and Counter Terrorist Financing
9.1. The Authorities intend to co-operate closely when they identify activities in Supervised Institutions and/or Cross-Border Establishments that violate national legislation, including money laundering, terrorist financing and unlawful banking practices, illegal banking or financial services business. The Authorities, to fulfil their supervisory duties, will exchange information on the observance by Supervised Parent Institutions and their Cross-Border Establishments of the national legislation in the field of financial crime, anti-money laundering and counter terrorist financing.
9.2. The Authorities will exchange information also:
— on national laws and regulations in the field of anti-money laundering and counter terrorist financing;
- on the practice of identifying and scrutinising clients and beneficiaries as well as identification of operations related to the legalisation (laundering) of criminally obtained incomes and terrorism financing;
— on typical money laundering and terrorism financing schemes.
10. Crisis Situations
10.1. The Authorities shall inform each other without delay about an incipient crisis relating to a Supervised Parent Institution or its Cross-Border Establishment.
10.2. The Authorities intend to co-operate if there is a need to adopt supervisory measures which would affect the other Authority’s area of supervision.
11. Other Provisions
11.1. The Authorities shall meet periodically and when necessary to discuss and settle matters relating to supervision of Supervised Parent Institutions and their Cross-Border Establishments. The issues relating to the implementation of this Memorandum may also be discussed at such meetings.
11.2. To ensure the practical implementation of co-operation after this Memorandum comes into force, the Authorities shall exchange lists of contact persons.
11.3. The Authorities shall not object to placing this Memorandum on their websites or making it public through other means.
11.4. This Memorandum shall come into force as of its signing and will remain effective until one of the Authorities notifies in advance the other in writing about its decision to terminate it. In this case, this Memorandum shall remain in effect for 30 days after the notification date. Requests for assistance made before that date shall be fulfilled by the Authorities in compliance with the terms and conditions of this Memorandum. In the event of termination of this Memorandum, information obtained under this Memorandum will continue to be treated confidentially.
11.5. In cases of major changes in Russian or Finnish relevant legislation this Memorandum of Understanding will be reviewed.
11.6. This Memorandum of Understanding is a statement of intent and does not, and is not intended to, create any legally binding obligations. No provision of this Memorandum is intended to give rise to the right on the part of any person, entity or governmental authority to obtain any information or to challenge the execution of a request for information under this Memorandum.
11.7. This Memorandum is done in two copies, in the English language.
|For the Central Bank
of the Russian Federation
Sergey M. Ignatiev
ANNEX to the MEMORANDUM OF UNDERSTANDING between RAHOITUSTARKASTUS (THE FINNISH FINANCIAL SUPERVISION AUTHORITY, FIN-FSA) and THE CENTRAL BANK OF THE RUSSIAN FEDERATION (BANK OF RUSSIA)
regarding co-operation in the supervision of Parent Supervised Institution Sampo Bank Group in Finland and its Subsidiary Closed Joint Stock Company Bank Industry and Finance (further — CJSC Profibank) in St Petersburg, the Russian Federation
This document is an Annex to the Memorandum of Understanding between Rahoitustarkastus (the Finnish Financial Supervision Authority, FIN-FSA) and the Central Bank of the Russian Federation (Bank of Russia). The Annex concerns co-operation in the supervision of the Parent Supervised Institution Sampo Bank Group in Finland and its subsidiary CJSC Profibank belonging to Sampo Bank Group in the Russian Federation.
1. Objective of the Annex
The aim of this Annex, in conjunction with the general Memorandum, is to facilitate effective and comprehensive supervision of the Sampo Bank Group and CJSC Profibank.
2. Supervisory responsibility of individual competent supervisory authorities
2.1. Supervisory responsibility of the FIN-FSA
In line with EU Directive 2006/48/EC, the FIN-FSA is the consolidating supervisor and thus responsible for the co-ordination and exercise of consolidated supervision concerning the Sampo Bank Group.
2.2. Supervisory responsibility of the Bank of Russia
The Bank of Russia in accordance with the legislation of the Russian Federation undertakes supervision of Sampo Bank Group’s subsidiary in Russia (CJSC Profibank).
3. Exchange of information
The FIN-FSA collates the findings of the supervisory authorities at the Sampo Bank Group level, draws conclusions and, if deemed necessary, reports the outcome of this work to the Bank of Russia and to the Sampo Bank Group.
The FIN-FSA shall report any significant matters which arise during the on-going supervision of the Sampo Bank Group that may be relevant to the Bank of Russia. The FIN-FSA shall plan, co-ordinate and organize possible supervisory enforcement actions concerning the Sampo Bank Group and communicate these regularly to the Bank of Russia to the extent that is relevant to the Bank of Russia.
The FIN-FSA can inform the Bank of Russia about the annual risk assessment of Sampo Bank Group when the information is relevant to the supervision of the subsidiary.
The Bank of Russia will report significant findings concerning Sampo Bank’s subsidiary in Russia to the FIN-FSA on a timely basis and in accordance with the mutually approved principles.
4. Other provisions
The FIN-FSA and the Bank of Russia shall compile and exchange a list of contact persons handling issues related to the Sampo Bank Group.̀ The list shall indicate names, telephone and fax numbers, e-mail addresses and areas of responsibility.
The FIN-FSA shall be responsible for updating the organisational chart representing the companies in the Sampo Bank Group. The chart shall be submitted to the Bank of Russia annually and whenever a major change occurs.
The FIN-FSA and the Bank of Russia shall not object to placing this Annex on their websites.
5. Revision of the Memorandum of Understanding
This Annex may be updated without changes to the general Memorandum.
|For the Central Bank
of the Russian Federation
Sergey M. Ignatiev