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Memorandum of Understanding between the Central Bank of the Russian Federation (the Bank of Russia) and The Central Bank of Montenegro

The Central Bank of the Russian Federation (Bank of Russia) and the Central Bank of Montenegro, hereinafter referred to as the “Supervisory Authorities”, have reached an understanding on the need to exchange information and other types of mutual co-operation in the area of banking supervision on a cross-border basis, for the effective fulfillment of their functions and assist the reliability and stability of banking systems in their countries. This understanding also meets the Basal Committee recommendations on the principles of conducting consolidated and comprehensive supervision and co-operation between Supervisory Authorities.

1. The Powers of the Supervisory Authorities

1.1. The Russian Federation

Under the legislation of the Russian Federation, the Central Bank 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 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 (the Bank of Russia).

1.2. The Republic of Montenegro

Under the Law on the Central Bank of Montenegro, the Central Bank of Montenegro is an independent institution of the Republic of Montenegro and it is solely responsible for monetary policy, establishing and maintaining of a sound banking system and efficient payment system in the Republic of Montenegro. The Central Bank of Montenegro grants and revokes licences for operations of banks and financial institutions, regulates and supervises their operations and carries out the bankruptcy and liquidation proceedings of banks and financial institutions in the Republic.

2. For the Purposes of this Memorandum:

2.1. “Supervised institution(s)”: a legal entity authorised to conduct banking operations, whose activities are subject to licensing and supervision in accordance with the legislation of the Russian Federation or the Republic of Montenegro.

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 Republic of Montenegro

Bank is a legal entity, whose activity is the acceptance of deposits of legal entities and private individuals and use of such funds, whether in whole or partially for granting loans or investing for its own account and risk in accordance with the Law on banks of the Republic of Montenegro.

Financial institution means a legal entity engaged primarily in granting loans or investing for its own account and on its own risk or dealing with other financial services.

2.2. “Supervised parent institution(s)”: a supervised institution incorporated in one of the states, which has a cross-border establishment ( a subsidiary or a representative office), located in the other state.

2.3. “Cross-border establishment(s)”:

2.3.1. The Russian Federation

In the Russian Federation, foreign banks may participate in the authorised capital of credit institutions and establish subsidiaries, whose activities are subject to licensing under the Russian Federation 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. The Republic of Montenegro

In the Republic of Montenegro foreign banks may establish dependent legal entities (subsidiaries) whose activities are subject to licencing under the legislation of the Republic of Montenegro and may also establish representative offices.

A dependent legal entity is an entity in which another legal entity (parent institution) owns a majority of outstanding voting shares or who, without regard to the percentage of the voting ownership exercises, directly or indirectly, a dominating influence over the policies or strategies of the bank, either alone or on concert with other parties.

Representative office is a part of a bank which does not have the status of a legal entity and is established for the purposes of representing the interests of that bank and has no right to conduct banking operations.

2.4. “Home country”: the country in which a supervised parent institution is registered.

2.5. “Host country”: the country in which a cross-border establishment is registered.

2.6.“On-site inspection(s)” and “on-site examination(s)”

2.6.1. In the Russian Federation — inspection carried out at a cross-border establishment by duly authorised representatives of the home country Supervisory Authority.

2.6.2. In the Republic of Montenegro — examination which is carried out by direct access to business books, book-keeping and other documentation at a cross-border establishment.

3. Exchange of Information

3.1. To ensure and enhance the efficiency of supervision over supervised institutions and their cross-border establishments, the Supervisory Authorities express their wish to co-operate and exchange information in the following areas: licensing, on-going supervision, on-site inspections, owner control, anti-money laundering and counter terrorist financing.

The Supervisory Authorities shall exchange information on the state and development of the national banking sector, the principal banking supervision standards and requirements and significant changes therein.

The Supervisory Authorities shall not exchange information on the state and the transactions of individual accounts of the clients of the supervised institutions, which in accordance with their national legislation constitute the banking secret.

The Supervisory Authorities shall agree to provide all possible information to one another necessary for identifying the real owners of supervised home country institutions submitting an application for a licence to open a cross-border establishment and/or carrying-out cross-border transactions with supervised institutions in the Russian Federation or the Republic of Montenegro respectively, as well as the real owners of supervised parent institutions which have cross-border establishments in the Russian Federation or the Republic of Montenegro. If the Supervisory Authorities do not have the requested information, they shall do everything to receive it.

3.2. 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 the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)” the Bank of Russia is entitled to inquire the central bank and the banking supervision 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 supervision authority of a foreign state the above information or documents which do not contain data on the operations of credit institutions and of their clients, under the condition that the said banking supervision 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 an account for the requirements established by the legislation of these foreign states.

3.3. In the Republic of Montenegro

Under the legislation of the Republic of Montenegro ( By-law and the Decision on the manner and proceedings on supervision of banks) the Central Bank of Montenegro co-operates with the representatives of foreign institutions that are authorized for supervision of business operations of the banks, on the basis of a concluded agreement on co-operation.

This co-operation includes the exchange of information with foreign Supervisory Authorities.

3.4. Co-operation within the framework of this Memorandum shall be conducted at the initiative of a Supervisory Authority on the basis of a request for assistance (further — request).

3.5. A request shall be made in writing. Any type of communication facilities may be used to transmit a request.

3.6. Assistance within the framework of this Memorandum may be refused wholly or in part if the requested Supervisory Authority believes that the fulfillment of the request contravenes its national legislation or runs counter to the interests of the state. In this case, the requesting Supervisory Authority shall be notified in writing and given the reasons for the refusal.

3.7. Each Supervisory Authority shall do everything to ensure a prompt and fullest possible reply to the request of the other Supervisory Authority or it shall notify the latter about the circumstances that prevent or delay the fulfillment of the request.

3.8. Each Supervisory Authority shall bear the expenses that may arise in implementing this Memorandum unless a different procedure is agreed upon.

4. Ensuring the Confidentiality of Information

4.1. The Supervisory Authorities shall take appropriate measures to ensure the confidentiality of information or documents in keeping, using and passing it to each other, including the transmission of information by any type of communication facilities.

4.2. Confidential information provided within the framework of this Memorandum may not be used without the consent of the Supervisory Authority that provided it for purposes other than those for which it was requested and provided.

4.3. Confidential information or documents may be passed to a third party in each particular case if there is a written permission to do so from the Supervisory Authority that has provided confidential information, except for the cases, when obligation to provide information is stipulated by law.

If the Supervisory Authority receiving information or documents is obliged by law to disclose confidential information received from the providing Supervisory Authority to a certain third party, the receiving Supervisory Authority will notify the providing Supervisory Authority beforehand and will co-operate in seeking to preserve as far as legally possible the confidentiality of such information or documents.

4.4. Should this Memorandum be terminated, the supervisory information received within the framework of this Memorandum shall remain confidential.

5. Licensing

5.1. Application of a supervised parent institution to the host country Supervisory Authority regarding issuing of license (permission) on 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 country Supervisory Authority shall inform the home country Supervisory Authority about its contents, and after consideration of the application shall inform in writing about its results.

5.3. The home country Supervisory Authority shall inform the host country Supervisory Authority whether the applicant complies with the national legislation, as well as about the state of corporate governance, risk management and internal control system and the index of business operations (own funds, solvency ratio, etc.) of the applicant supervised institution. The home country Supervisory Authority informs the host country Supervisory Authority on the compliance with qualification requirements of the prospective managers of the cross-border establishment.

6. Co-operation concerning owner control

6.1. The Supervisory Authorities may consult 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.

6.2. For the purposes of this Memorandum, an acquisition signifies the purchase of a stake in the capital of a supervised institution registered in the Russian Federation or in the Republic of Montenegro, of a size that will require, under the national legislation, preliminary agreement with the respective Supervisory Authority.

7. Co-operation in ongoing supervision of supervised parent institutions and cross-border establishments

7.1. The Supervisory Authorities will inform each other about concerns about the financial soundness of supervised parent institutions and cross-border establishments in the respective other country. They will also notify each other of actions which they have taken in respect of such a cross-border establishment as the host Supervisory Authority or on the supervised parent institution as home Supervisory Authority if the information in their judgement is likely to be important to the other Supervisory Authority to assist that other Supervisory Authority in the exercise of its functions.

If the host country Supervisory Authority takes actions in respect of a cross-border establishment, the home country Supervisory Authority has the right to inform the supervised parent institution about it.

7.2. The Supervisory Authorities will discuss with each other any significant information on supervised parent institutions and cross-border establishments in the other country which is likely to be relevant to the other Supervisory Authority to assist that other Supervisory Authority in the exercise of its functions. Relevant matters are in particular: concerns about the financial soundness of a supervised parent institution or a cross-border establishment (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 a supervised parent institution or a cross-border establishment, concerns arising from late and/or unreliable reporting.

8. Co-operation in Conducting On-site Inspections (Examinations)

8.1. The Supervisory Authorities agree that co-operation is useful in assisting each other in carrying out on-site inspections (examinations) of cross-border establishments. The Supervisory Authorities will provide full support to each other in such inspections. The Supervisory Authorities shall inform each other on the results of the on-site inspections (examinations) to the extent permitted by the national legislation.

8.2. In the Russian Federation

The home country Supervisory Authority should notify the host country Supervisory Authority in advance about the intention to conduct an on-site inspection, giving the information about the inspectors, the purpose of the inspection, its expected duration and the period to be inspected.

The home country Supervisory Authority shall regulate on its own the relations with cross-border establishments in respect to the access of its representatives for the purpose of on-site inspections. In this regard, the host country Supervisory Authority will not impede the home country Supervisor’s free access to the Cross-border Establishment.

8.3. In the Republic of Montenegro

On-site examinations of cross-border establishments may be conducted by the home country Supervisory Authority with the consent of the host country Supervisory Authority.

The home country Supervisory Authority may also participate in on-site examinations carried out by the host country Supervisory Authority.

The host country Supervisory Authority shall notify the home country Supervisory Authority as soon as possible, but at least three months in advance, of any planned examination of a cross-border establishment, indicating the number of examination staff and the purpose as well as the expected duration of the examination. After the receipt of such a notification the home country Supervisory Authority shall notify the host country Supervisory Authority within one month of its intention to participate in an on-site examination of a cross-border establishment.

The host country Supervisory Authority shall also notify the home country Supervisory Authority as much in advance as possible of any ad hoc examination of a cross-border establishment, indicating the number of examination staff and the purpose as well as the expected duration of the examination.

The home country Supervisory Authority shall also notify the host country Supervisory Authority as soon as possible after having been notified by the host country Supervisory Authority of an ad hoc on site examination of a cross-border establishment of its intention to participate in such an ad hoc on-site examination.

9. Co-operation on Anti-Money Laundering and Counter Terrorist Financing.

The Supervisory Authorities to fulfill their supervision duties shall exchange the information:

— on national laws and regulations in the field of anti-money laundering and counter terrorist financing;

— on the practice of identifying and scrutinizing clients and beneficiaries;

— on the observance by supervised parent institutions and their cross-border establishments of the national legislation in the field of anti-money laundering and counter terrorist financing;

— on typical money laundering and terrorist financing schemes.

10. Other Provisions

10.1. The Supervisory Authorities will endeavour to advise each other upon request on any aspect of their regulatory systems and notify major changes in their national legislation within their jurisdiction which is likely to have a significant bearing on the activities of cross-border establishments.

10.2. The Supervisory Authorities shall meet at least once a year on a regular basis to discuss and settle matters relating to supervision of cross-border establishments. The issues relating to the implementation of this Memorandum may also be discussed at such meetings.

10.3. To ensure the practical implementation of co-operation after this Memorandum comes into force, the Supervisory Authorities shall exchange lists of contact persons (with full names, job titles, telephone and fax numbers and e-mail addresses).

10.4. 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 Central Bank of Montenegro, banking system, laws and regulations of the Republic of Montenegro may be found on the website at www.cb-cg.org

The Bank of Russia and the Supervisory Authority of the Foreign State shall not object to placing this Memorandum on their websites.

10.5. This Memorandum shall come into force as of its signing and it will remain effective until one of the Supervisory 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 Supervisory Authorities in compliance with the terms and conditions of this Memorandum.

10.6. This Memorandum is done in two copies, in the English language.

For the Central Bank of the Russian Federation For the Central Bank of Montenegro
S.M. Ignatiev

Chairman of the Central Bank of the Russian Federation

Lj. Krgović

President of the Council of the Central Bank of Montenegro

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Last updated on: 29/10/2018