Memorandum of Understanding Between the Central Bank of the Russian Federation and the Bundesanstalt Für Finanzdienstleistungsaufsicht Concerning Their Cooperation in the Field of Supervision of Banks
1. The Central Bank of the Russian Federation (hereinafter “Bank of Russia”) and the Federal Financial Supervisory Authority (Bundesanstalt fur Finanzdienstleistungsaufsicht, hereinafter “BaFin”), (both hereinafter referred to jointly as “the Authorities” and each “an Authority”) express their willingness to cooperate on the basis of reciprocity as well as mutual trust and understanding and agree to base their co-operation in the field of supervision of Authorised Institutions on the principles and procedures outlined in this Memorandum of Understanding, in order to facilitate the performance of the Authorities’ respective duties and to promote the adequate functioning of Authorised Institutions in Russia and/or in Germany, according to their national legislation. Nothing in this Memorandum of Understanding shall require either of the Authorities to provide information or assistance the disclosure or provision of which is restricted or prohibited by law or to act in any manner which is restricted or prohibited by law.
2. 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 (banking 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 examinations 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 (the Bank of Russia).
3. As the central body in accordance with the law on a single financial services supervisory authority (“Gesetz uber die Bundesanstalt fur Finanzdienstleistungsaufsicht”), the German Banking Act (“KWG”) and other special laws, the BaFin is entrusted with the supervision of banks, insurance companies and investment firms in Germany. As an independent superior federal authority within the purview of the Federal Ministry of Finance, the BaFin forms a part of the direct federal administration. Exercising its sovereign functions, the BaFin closely co-operates with the Deutsche Bundesbank in carrying out the supervision of banks and investment firms. The BaFin and the Deutsche Bundesbank are hereinafter jointly referred to as “German banking supervisors”.
4. For the purposes of this Memorandum of Understanding, the concepts mentioned below will have the following meaning:
In the Russian Federation a legal entity
authorised to conduct banking operations, whose activities are subject to
licensing and banking supervision in accordance to article 1 of the Federal Law
on Banks and Banking Activities, articles 4,
“Authorised Parent Institution(s)”: A legal entity, which has a Cross-Border Establishment located in the Russian Federation or in Germany, respectively.
“Cross-Border Establishment(s)”: A branch or a subsidiary or a representative office of an Authorised Institution incorporated within the jurisdiction of one of the Authorities and operating in the jurisdiction of the other Authority.
“Home Supervisor”: The Authority located in the Russian Federation or in Germany, respectively, responsible for the supervision on a consolidated basis of an Authorised Institution.
“Host Supervisor”: The Authority located in the Russian Federation or in Germany, respectively, in which a Cross-Border Establishment of an Authorised Institution is registered.
“On-Site Inspections”: The official inspections carried out at a Cross-Border Establishment by the Home Supervisor, through duly authorised officers or auditors and/or examiners commissioned by the Home Supervisor.
Information regarding Authorised Institutions
5. The Authorities intend to co-operate in the supervision of Cross-Border Establishments of Authorised Institutions. The scope of co-operation encompasses the authorisation process (both issuance and revocation) as well as the ongoing supervision of Cross-Border Establishments. The Authorities intend upon request for assistance to share information in respect of Cross-Border Establishments which will enable or assist the recipient Authority in the exercise of its supervisory functions. A request for assistance shall be made in writing. Any type of communication facilities may be used to transmit a request. The BaFin will pass on information received from the Bank of Russia to the Deutsche Bundesbank, having regard to the domestic allocation of responsibility for the supervision of Authorised Institutions in Germany, on condition that the Deutsche Bundesbank will preserve the confidentiality of the information and will not disclose it without the prior written consent of the Bank of Russia to third parties and otherwise in accordance with the provisions of this Memorandum of Understanding. The Authority providing the information referred to in this paragraph may attach conditions to any such disclosure of information prohibiting any further disclosure of such information without the providing Authority’s consent.
6. If an Authorised Parent Institution applies to the Authority of the other jurisdiction to establish a Cross-Border Establishment, the latter shall inform the Home Supervisor without delay. If the adequacy of home banking supervision is a statutory prerequisite which the Host Supervisor needs to address in the licensing procedure, it would contact the Home Supervisor to settle any question in this regard.
7. The Home Supervisor intends to inform the Host Supervisor whether the applicant is fully subject to and complies with the national legislation, as well as about the state of corporate governance, risk management and internal control system of the applicant Authorised Institution. The Home Supervisor intends to disclose information to the Host Supervisor on failure to comply with qualification requirements of the prospective managers of the Cross-Border Establishment.
Co-operation concerning owner control
8. The Authorities intend to consult before granting permission with regard to a Cross-Border Establishment of an Authorised Institution licensed in the other jurisdiction or assessing any acquisition of a holding in a domestic Authorised Institution through an Authorised Institution within the jurisdiction of the other Authority. In order to verify declarations made by Authorised Institutions or Cross-Border Establishments regarding ownership issues, the Authorities intend to exchange information available to them.
Co-operation in ongoing supervision of Cross-Border Establishments
9. The Bank of Russia and the German banking supervisors will endeavour to inform each other, in good time about concerns about the financial soundness of Authorised Institutions having Cross-Border Establishments in the respective other jurisdiction. They will also endeavour to notify each other of actions which they have taken in respect of such a Cross-Border Establishment as host supervisor or on the Authorised 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 functions.
10. The Bank of Russia and the German banking supervisors intend to discuss with each other any significant information on Authorised Institutions having Cross-Border Establishments in the other jurisdiction which is likely to be relevant to the other Authority to assist that other Authority in the exercise of its functions. Relevant matters are in particular: concerns about the financial soundness of an Authorised Institution (failure to meet capital adequacy or other financial requirements, significant losses, rapid decline in profits or a deterioration in profitability), concerns relating to banking supervision both on a solo and consolidated basis, concerns arising from the results of inspections, or reports from and meetings or other communications with an Authorised Institution or other regulatory body (subject to obtaining any necessary consent from any such regulatory body), concerns arising from late and/or unreliable reporting and concerns relating to supervisory arrangements in third countries (subject to obtaining any necessary consent from any relevant third country regulatory body).
11. Representatives of the Bank of Russia and the German banking supervisors will endeavour to convene ad-hoc meetings to promote the resolution of supervisory problems concerning a Cross-Border Establishment in the respective other jurisdiction, whenever either side reasonably requests on the basis that it has a material supervisory concern.
12. For institutions which are not licensed in Russia and in Germany respectively and which are licensed or apply for a licence with one of the Authorities, the Bank of Russia and the BaFin intend, as far as they are able, to discuss any significant information available to them which might be relevant to the other Authority to assist that other Authority in the exercise of its functions.
13. The Authorities intend to co-operate closely when they identify activities in Authorised Institutions that violate national legislation, including legislation on countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism, and unlawful banking practices. For the purposes of this Memorandum of Understanding, such financial crimes include in particular: money laundering and all violations of law on financial markets. This also includes illegal banking or financial services business. The Authorities will endeavour to share information on financial crime concerning the respective Authorised Institutions which have Cross-Border Establishments in the other jurisdiction or which could affect the other jurisdiction. In the framework of co-operation in the field of countering the legalisation (laundering) of criminally obtained incomes and the financing terrorism the Authorities also intend to exchange the following information:
- laws and regulations in the field of countering the legalisation (laundering) of criminally obtained incomes and the financing terrorism;
— on the practice of identifying and scrutinising clients and beneficiaries;
— on typical money laundering and terrorist financing schemes.
14. The Authorities intend to inform each other without delay if they learn of an incipient crisis relating to any Authorised Institution supervised by either which has Cross-Border Establishments in the respective other jurisdiction.
15. The Authorities agree that co-operation is particularly useful in assisting each other in carrying out On-Site Inspections of Cross-Border Establishments. The Authorities will provide full support to each other in such inspections. The Home Supervisor shall regulate on its own the relations with Cross-Border Establishments in respect to the access of the auditors and/or examiners for the purpose of On-Site Inspections. In this regard, an Authority will not impede the other Authority’s free access to such Cross-Border Establishment.
16. The Authorities will notify each other in advance of any On-Site Inspection, giving details of the names of the auditors and/or examiners, the purpose of the inspection and its expected duration. The Authorities may accompany any such On-Site Inspection carried out by the Authorities themselves or the auditors and/or examiners commissioned by the Authorities. The Authorities will keep each other informed on the results of the inspections, if of interest to the Host Supervisor, to the extent reasonable and permitted by the national legislation and in a timely manner. If the Authorised Parent Institution has been inspected along with its Cross-Border Establishment in the other jurisdiction, the Home Supervisor will endeavour to provide the Host Supervisor with information relevant to the Cross-Border Establishment, which will assist the Host Supervisor in exercising its functions.
Confidentiality of information
17. Compliance with the obligation of professional secrecy and confidentiality by all employees who receive confidential information from the other Authority in the course of their activities is a necessary condition for a successful co-operation between the Authorities. The Authorities agree that any confidential information shared through these arrangements will be used only for lawful supervisory purposes. The Authorities will maintain the confidentiality of all information received through these arrangements from each other and will not disclose any such information other than as necessary to carry out their supervisory responsibilities without first obtaining the prior written consent of the other Authority and then only in accordance with the conditions (if any) attached by the providing Authority. Each Authority will, if it receives any legally enforceable demand for information received from the other Authority or acquired in the course of an on-site inspection in the other Authority’s jurisdiction pursuant to which it is obliged by the national legislation to disclose such information (notwithstanding any other provision of this Memorandum of Understanding), promptly notify the other Authority and will co-operate in seeking to preserve so far as legally possible the confidentiality of such information. The BaFin will pass on the information received from the Bank of Russia to the Deutsche Bundesbank to the extent that such information is of significance for the performance of the functions of the Deutsche Bundesbank as outlined in Section 7 KWG, on the basis that the Deutsche Bundesbank shall only use the information for lawful supervisory purposes and shall not disclose the information to any other person without the prior written consent of the Bank of Russia.
18. In order to enhance the quality of co-operation, representatives of the Bank of Russia and the German banking supervisors will endeavour to convene periodically to discuss issues concerning Authorised Institutions which maintain Cross-Border Establishments within their respective jurisdictions.
19. Written requests shall be addressed to the Director of the External and Public Relations Department, in the case of the Bank of Russia, and to the Head of International Policy/Affairs, in the case of the BaFin.
20. The Authorities will endeavour to ensure that they send each other the relevant lists of licensed Authorised Institutions subject to supervision. They will also endeavour to advise each other upon request on any aspect of their regulatory systems and notify any major change in their national legislation within their jurisdiction which is likely to have a significant bearing on the activities of Cross-Border Establishments.
21. This Memorandum of Understanding shall enter into force as of the date of its signing by the Authorities and shall remain in existence until either Authority notifies the other in writing of its wish to revise, amend or withdraw from this Memorandum of Understanding. Thirty days’ notice of any such action will be given.
22. If either Authority gives such notice, the Authorities will nevertheless endeavour to continue co-operation and assistance in accordance with this Memorandum of Understanding with respect to all requests for assistance that were made before the effective date of notification until the requesting Authority withdraws the matter for which assistance was requested. In the event of termination of this Memorandum of Understanding, information obtained under this Memorandum of Understanding will continue to be treated confidentially.
23. This Memorandum of Understanding shall be modified by the Authorities’ mutual consent. The modifications shall be formalised in writing specifying the date they will come into force.
24. 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 of Understanding is intended to give rise to the right on the part of any person, entity or governmental authority, directly or indirectly, to obtain any information or to challenge the execution of a request for information under this Memorandum of Understanding.
25. Without prejudice to paragraph 24 above, the Authorities acknowledge their mutual intention that provision of, or requests for, information under this Memorandum of Understanding may be denied (a) where compliance would require the Bank of Russia or the BaFin to act in a manner that would violate applicable law or any agreement entered into before the date of this Memorandum of Understanding, (b) on grounds of public interest or national security or © when compliance with a request for provision of information would interfere with an ongoing investigation in circumstances where the prejudice to the investigation is likely to outweigh the adverse effects of denying the information.
26. Any difference derived from the interpretation or application of the provisions of this Memorandum of Understanding shall be solve by the Authorities in common agreement.
For the Central Bank
of the Russian Federation
Sergey M. Ignatiev
The PresidentDated: 03.03.2006