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MEMORANDUM OF UNDERSTANDING between the Central Bank of the Russian Federation (Bank of Russia) and the Bank of Lithuania in the Field of Banking Supervision

The Central Bank of the Russian Federation and the Bank of Lithuania (hereinafter referred to as the banking supervisory authorities),

taking into consideration recommendations of the Basel Committee on Banking Supervision, such as the Basel Concordat, Paper No. 30 “Core Principles for Effective Banking Supervision” (September 1997) and Paper No. 27 “Supervision of Cross-Border Banking” (October 1996) (hereinafter referred to as the Basel recommendations),

declaring their mutual interest in establishing and promoting relations in the field of supervision of credit institutions,

seeking to achieve mutual understanding on matters relating to banking regulation and supervision of credit institutions registered in the Russian Federation and the Republic of Lithuania,

demonstrating their readiness to facilitate the fulfillment of their corresponding duties and ensure the safe and reliable functioning of cross-border establishments in their countries,

wishing to facilitate and broaden mutually beneficial co-operation and the exchange of information between their countries on the basis of equality and non-discrimination,

convinced that the exchange of information will help improve mutual understanding and co-operation between the banking supervisory authorities,

realising that the exchange of information is a significant element of bilateral ties between the banking supervisory authorities, and

to achieve mutual understanding on co-operation in supervising cross-border establishments of credit institutions, the banking supervisory authorities have agreed as follows:

Chapter 1. General Provisions

For the purposes of this Memorandum of Understanding:

1. A credit institution:

a) in the Russian Federation: a legal entity whose principal objective is to derive profit and which on the basis of a special permit (licence) of the Central Bank of the Russian Federation (Bank of Russia) has the right to conduct banking operations under the Federal Law on Banks and Banking Activities. A credit institution may be established on the basis of any form of ownership as an economic entity.

A bank is a credit institution that has the exclusive right to conduct all of the following banking operations: take funds on deposit from private individuals and legal entities, invest such funds in its own name and for its own account on a repayable and chargeable basis for a specified term and open and keep personal and corporate bank accounts.

A 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. Permissible combinations of banking operations are established for non-bank credit institutions by the Bank of Russia.

b) in the Republic of Lithuania: an enterprise that has a licence of the Bank of Lithuania and takes deposits and other returnable funds from non-professional market participants, extends loans, provides other financial services and assumes related risk and liability.

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

3. A cross-border establishment is a subsidiary, a branch, a representative office which is established by the parent credit institution and is situated on the territory of the other country.

a) in the Russian Federation, foreign credit institutions may have a stake in the authorised capital of credit institutions and also set up subsidiary credit institutions and open representative offices.

Under the Russian Federation legislation:

A subsidiary credit institution is a legal entity in which another credit institution has a controlling stake or the opportunity under an agreement signed between them or otherwise to shape the decisions taken by the subsidiary credit institution.

A representative office of a credit institution is its separate division situated outside the location of the credit institution and representing and protecting 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 it conducts its activities on the basis of the regulations issued by the credit institution that has established it.

b) in the Republic of Lithuania, according to the procedures established by the laws of the Republic of Lithuania, foreign credit institutions may create subsidiary credit institutions (banks) or acquire shares in operating credit institutions (banks) and open branches and representative offices.

4. The home country is the country where a parent credit institution is registered.

5. The host country is the country where a cross-border establishment is registered.

Chapter 2. Banking Supervisory Authorities

6. The Russian Federation.

The Central Bank of the Russian Federation (Bank of Russia) is the body of banking regulation and banking supervision of credit institutions. The Bank of Russia is independent in its activities from the federal government. The powers of the Bank of Russia as the body of banking regulation and banking supervision are established by the Federal Law on the Central Bank of the Russian Federation (Bank of Russia).

The Republic of Lithuania.

The Bank of Lithuania is the authority supervising banks and other credit institutions with Bank of Lithuania licences. The legal status and functions of the Bank of Lithuania are established by the Law of the Republic of Lithuania on the Bank of Lithuania.

Chapter 3. Exchange of Information

7. The banking supervisory authorities shall exchange information on the activities of cross-border establishments and their parent credit institutions in the following areas:

— issuing permits (licences) to conduct banking operations;

— supervising their activities;

— situations causing concern of the banking supervisory authorities, including the situations threatening the lawful interests of depositors and creditors, as well as the stability of their national banking systems.

8. Co-operation within the framework of this Memorandum shall be conducted on the initiative of either banking supervisory authority on the basis of a request for assistance in implementing banking supervision.

9. A request for assistance shall be made in writing. Any communication facilities may be used in transmitting a request.

10. A request for assistance within the framework of this Memorandum may be rejected wholly or in part if the requested banking supervisory authority believes that the fulfillment of this request contravenes its national legislation or harms the interests of the state. In this case, the requesting banking supervisory authority shall be notified about such a decision in writing and given the reasons for the refusal.

11. Each banking supervisory authority shall take all the necessary measures to ensure a prompt and fullest possible response to a request from the other banking supervisory authority or notify the latter about the circumstances that prevent or delay the fulfillment of the request.

12. Each banking supervisory authority shall bear the expenses that will arise in implementing this Memorandum unless another procedure is agreed upon.

Chapter 4. Ensuring Confidentiality of Information

13. In the Russian Federation, the exchange of information with the banking supervisory authorities of foreign states, including matters relating to ensuring confidentiality of information, are regulated by the Federal Law on the Central Bank of the Russian Federation (Bank of Russia) and Federal Law on Banks and Banking Activities.

In the Republic of Lithuania, these matters are regulated by the Law of the Republic of Lithuania on the Bank of Lithuania and laws regulating the activities of credit institutions.

14. The banking supervisory authorities shall guarantee the strict observance of confidentiality with regard to information received from the other banking supervisory authority, if the latter has requested to do so. The banking supervisory authorities shall make the necessary actions to ensure confidentiality of information when passing it to each other by any communication facilities.

15. Compliance with information confidentiality requirement by all employees who receive supervisory information within the framework of this Memorandum is absolutely necessary for the successful co-operation between the banking supervisory authorities.

16. Information received on the basis of this Memorandum may only be used for supervision and shall only be provided to the authorised agencies in compliance with the national legislation of both countries. In other cases supervisory information shall not be passed to a third party without prior written consent by the banking supervisory authority that has provided this information.

Chapter 5. Co-operation in the Field of Supervision

Section 1. In the course of licensing:

17. Acting in accordance with Basel recommendations the banking supervisory authorities have agreed that if a credit institution registered in one of the countries (home country) has requested the banking supervisory authority of the other country (host country) to grant it a permit (licence) to open a cross-border establishment, the banking supervisory authorities shall consider such requests within the time periods and in compliance with the requirements established by host country national legislation and only if the above credit institution has presented written permission of the home country banking supervisory authority.

18. At the request of the host country banking supervisory authority, the home country supervisory authority shall provide the following information on a parent credit institution, necessary for making the decision on granting it a licence (permit) to open a cross-border establishment:

— the date of the state registration of the credit institution in the Russian Federation and the date of the official registration of the credit institution in the Republic of Lithuania;

— the operations permitted by banking licence;

— the structure of management and internal control;

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

— accounting and financial statements of a credit institution for the six months preceding the date of the request;

— information on the accounting standards used by credit institutions in compiling reports;

— the amount of the parent credit institution’s own funds (capital);

— other information necessary to make a decision concerning opening of a cross-border establishment, which can be provided in the framework of this Memorandum of Understanding.

19. When making decisions on granting permits (licences) to open a cross-border establishment of a credit institution registered in the other country, the banking supervisory authorities shall be guided by the requirements of their national legislation and take into account information received from the other banking supervisory authority.

20. The banking supervisory authorities shall notify each other in writing about the opening of a cross-border establishment.

21. The host country banking supervisory authority shall inform the home country banking supervisory authority about any changes connected with the following:

— the range of banking operations the corresponding cross-border establishment has permission to conduct;

— the management structure of the cross-border establishment;

— the replacement of management of the cross-border establishment.

Should the information concern the change in the composition of the management bodies of a cross-border establishment, the banking supervisory authorities shall exchange within one month after the receipt of such information the additional data relating to the business reputation and qualification of the candidate for the position of the manager of a cross-border establishment.

22. The banking supervisory authorities shall maintain co-operation with regard to the acquisition of shares (stakes) in a credit institution.

The acquisition by a legal entity or private individual or a group of legal entities and/or private individuals connected by an agreement, including those capable of taking concerted action, of shares (stakes) in a credit institution registered in the other country shall require prior agreement of the banking supervisory authorities if this is required by national legislation.

For the purposes of this Memorandum, an acquisition is a transaction as a result of which shares (stakes) are acquired in a credit institution registered in the Russian Federation or the Republic of Lithuania, whose acquisition under the national legislation of the corresponding country requires prior agreement of the banking supervisory authority.

23. In the Russian Federation, the list of registered credit institutions is published in the Bank of Russia official publication, The Bank of Russia Bulletin, and placed on the Bank of Russia site on the Internet at www.cbr.ru.

In the Republic of Lithuania, the notices of the licences issued to credit institutions are published in the information annex to the official publication Valsybes žinios. The list of credit institutions licensed by the Bank of Lithuania is also placed on the Bank of Lithuania site on the Internet at www.lb.lt.

Section 2. While supervising the activities of credit institutions

24. The host country banking supervisory authority shall supervise cross-border establishments in compliance with host country legislation.

25. The home country banking supervisory authority shall supervise parent credit institutions, including their cross-border establishments in the host country, on a consolidated basis.

26. The host country banking supervisory authority shall not obstruct the provision of information and reports by cross-border establishments to the parent credit institution according to the standards, established in the home country.

27. The home country banking supervisory authority with regard to parent credit institutions and the host country banking supervisory authority with regard to cross-border establishments shall exchange the following information by request:

— the financial standing of cross-border establishments and parent credit institutions;

— the violations by above credit institutions and their cross-border establishments of legislation on banking supervision and on countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism;

— the sanctions used by the banking supervisory authorities against a parent credit institution or cross-border establishment.

28. The banking supervisory authorities shall consider especially useful rendering assistance to one another in organising inspections.

29. Should it be necessary to inspect a cross-border establishment in the host country, the home country banking supervisory authority shall notify the host country banking supervisory authority at least 25 working days before the beginning of the projected inspection on the following:

— the intention to inspect a cross-border establishment, indicating the name of the cross-border establishment;

— the subject matter of the inspection.

30. The procedure for providing information on inspection results to the host country banking supervisory authority is agreed upon in each particular case.

31. In the Russian Federation, inspections are conducted by the authorized representatives of the Bank of Lithuania on their own. The authorized representatives of the Bank of Russia may be present during the inspection of a cross-border establishment.

In the Republic of Lithuania, inspections of branches and representative offices of credit institutions carried out by the Bank of Russia are conducted with the participation of the representatives of the Bank of Lithuania or by the Bank of Russia alone (without the participation or presence of the representatives of the Bank of Lithuania). The Bank of Russia inspects branches and representative offices of credit institutions on its own if the Bank of Lithuania has not made known its intention to participate in the inspection. Inspections of subsidiary credit institutions are conducted jointly with the Bank of Lithuania.

32. Representatives of the home country banking supervisory authority and the host country banking supervisory authority may meet to discuss issues, stipulated in point 29 of this Memorandum, as well as other arising issues.

33. The banking supervisory authorities may also hold a meeting, including representatives of the cross-border establishment, to discuss the results of the examination and other arising issues.

Chapter 6. Examination of Customers’ Claims

34. The claims of customers of cross-border establishments with regard to the activities of these establishments shall be examined by the banking supervisory authority that has received the claim under the national legislation of the corresponding country. In necessary, the banking supervisory authorities may hold consultations and inform each other about decisions they have taken.

Chapter 7. Co-operation in Countering the Legalisation (Laundering) of Criminally Obtained Incomes
and the Financing of Terrorism

35. The banking supervisory authorities shall co-operate in countering money laundering and terrorist financing, taking into account the relevant international standards and acting within the competence granted to them by national legislation, including the exchange of information:

— on the requirements of banking regulation and banking supervision laws and regulations, including those designed to counter money laundering and terrorist financing;

— on the compliance by parent credit institutions and cross-border establishments with the laws against money laundering and terrorist financing.

Chapter 8. Final Provisions

36. The banking supervisory authorities shall conduct correspondence with one another in the English language. As for the language to be used at meetings and other events, it shall be decided in each particular case.

37. If necessary, representatives of the banking supervisory authorities shall hold meetings to discuss matters relating to supervision of credit institutions and their cross-border establishments and also matters relating to countering the laundering of criminally obtained and the financing of terrorism.

38. To ensure practical co-operation after this Memorandum comes into force, the banking supervisory authorities shall exchange in writing lists of contact persons (indicating their full names, job titles, telephone and fax numbers and e-mail addresses).

39. The banking supervisory authorities shall make changes in the Memorandum of Understanding in accordance with the changes made in their national legislation after having reached agreement to this effect.

40. This Memorandum of Understanding shall come into force as of its signing and shall be terminated under the decision of both banking supervisory authorities or if any banking supervisory authority declares about the decision to terminate the Memorandum unilaterally notifying the other banking supervisory authority of its intention six months before the termination date.

41. The banking supervisory authorities have agreed to delegate their powers and rights within the framework of this Memorandum of Understanding to their legal successors after notifying one another about their decision in writing one month before such a decision becomes effective.

42. This Memorandum of Understanding is done in two copies in the Russian language, two copies in the Lithuanian language and two copies in the English language, all the copies on each of the three languages being equally authentic and having the status of the original. Should any discrepancies be found in the translation of the texts, the banking supervisory authorities shall be guided by the English version.

43. The Agreement between the Central Bank of the Russian Federation (Bank of Russia) and the Bank of Lithuania on Co-operation in the Field of Supervision of Credit Institutions, signed in Vilnius on October 3, 1997, shall be terminated as of the date of the coming into force of this Memorandum.

For the Central Bank
of the Russian Federation

Sergey M. Ignatiev,
Chairman of the Central Bank
of the Russian Federation

" 24 ″ October 2005
For the Bank of Lithuania

R. Sarkinas,
Chairman of the Board
of the Bank of Lithuania

" 24 ″ October 2005
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Last updated on: 29/10/2018