Agreement on Co-operation in Banking Supervision between the Central Bank of the Russian Federation (the Bank of Russia) and the National Bank of Ukraine
The Central Bank of the Russian Federation (the Bank of Russia) and the National Bank of Ukraine, hereinafter referred to as the “banking supervisory authorities”, have reached an understanding on the need to exchange information for the effective fulfilment of their functions and assist the reliability and soundness of supervised institutions in their countries. This understanding also meets the Basel Committee recommendations on the principles of conducting consolidated and comprehensive supervision and co-operation between banking supervisory authorities.
1. The Powers of 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 (banking holdings) with banking legislation, Bank of Russia’s regulations and required ratios. To fulfil its regulatory and supervisory functions, the Bank of Russia conducts on-site inspections of credit institutions (their branches), sends them compulsory prescriptions to eliminate the shortcomings discovered in their work and applies measures to credit institutions as stipulated by the Federal Law on the Central Bank of the Russian Federation (the Bank of Russia).
The National Bank of Ukraine is the central bank of Ukraine, a specific central body of state governance that performs the functions of banking regulation and banking supervision as per the forms stipulated by the Law of Ukraine on Banks and Banking Activities, both directly and through the banking supervisory authority established by it. The National Bank of Ukraine constantly monitors the compliance by banks, their units, affiliated and related parties in Ukraine and abroad, banking associations, representative offices and branches of foreign banks in Ukraine, and also by other legal entities and private individuals with banking legislation, legislation in the field of anti-money laundering and terrorist financing, National Bank of Ukraine’s regulations and economic standards.
The National Bank of Ukraine conducts banking supervision on a solo and consolidated basis, sends banks compulsory prescriptions to eliminate the shortcomings discovered in their work and applies measures to them as stipulated by the Law of Ukraine on Banks and Banking Activities.
2. For the Purposes of this Agreement:
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 the legislation of Ukraine.
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 (licence) 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, to 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, to 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 Ukraine:
Bank is a legal entity that has the exclusive right on the basis of a licence of the National Bank of Ukraine to conduct the following banking operations in their entirety: to take funds on deposit from private individuals and legal entities, to lend such funds on its own behalf, terms and at its own risk, to open and keep individual and corporate bank accounts.
2.2. “Supervised parent institution”: a supervised institution incorporated in one of the states, which has a cross-border establishment.
2.3. “Cross-border establishments”:
2.3.1. In the Russian Federation:
In the Russian Federation, foreign credit institutions may participate in the authorised capital of credit institutions and establish subsidiaries, whose activities are subject to licensing under the Russian legislation, and also open representative offices.
Under the Russian legislation:
Subsidiary credit institution is a legal entity in which a supervised parent institution has majority interest and in accordance with an agreement concluded between them or otherwise can determine decisions taken by the subsidiary credit institution.
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 regulation established by the credit institution that created it.
2.3.2. In Ukraine:
In Ukraine, foreign banks may operate in the form of a legal entity that is a resident of Ukraine, such as a subsidiary bank, or in another form of participation in the authorised capital of a bank that is a resident of Ukraine, and also in the form of a branch or a representative office of a foreign bank.
Under the legislation of Ukraine:
Subsidiary bank is a bank in which a parent bank holds directly or indirectly, solely or jointly with other persons, a stake equivalent to 50% or more than 50% of the subsidiary bank’s authorised capital or votes and in accordance with an agreement concluded between them or otherwise can determine the decisions taken by the subsidiary bank.
Bank branch is a separate structural unit thereof that is not a legal entity and conducts its operations on behalf of the bank.
Representative office is a separate division thereof, situated outside the seat of the bank that represents and protects its interests and has no right to conduct banking operations.
2.4. “Home country” is a country, in which a supervised parent institution is registered.
2.5. “Host country” is a country, in which a cross-border establishment is registered.
3. Exchange of Information
3.1. To maintain stability of the banking systems in the Russian Federation and Ukraine and provide for their development and strengthening, the banking supervisory authorities co-operate in the field of banking supervision of parent institutions and their cross-border establishments pursuant to the provisions of this Agreement and in compliance with national legislations.
The banking supervisory authorities shall exchange information on the state and development of the national banking sector, the principal banking regulation and supervision standards and requirements and changes therein.
3.2. In the Russian Federation, the procedure for information-sharing with foreign supervisory authorities, including the procedure for ensuring the confidentiality of information, is regulated by the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)”. According to the Law, the Bank of Russia is entitled to supply a foreign banking supervisory authority with information and documents, which were received from credit institutions in the course of discharge of supervisory functions and do not contain data on the operations of credit institutions and of 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 Russian legislation. As for information and documents received from foreign central banks and banking supervisory authorities, the Bank of Russia is obliged to meet requirements for revealing information and submitting documents established by the Russian legislation, with an account for requirements established by the legislation of these foreign states.
3.3. In Ukraine, the procedure for information-sharing with foreign supervisory authorities, including the procedure for ensuring the confidentiality of information, is regulated by the Law of Ukraine “On Banks and Banking Activities”. In accordance with this Law, the National Bank of Ukraine is entitled, under an international treaty signed by Ukraine or pursuant to the principle of reciprocity, to submit to a foreign banking supervisory authority information received in the course of supervision of banks’ activities, under the condition that the information, which has been provided, will be used exclusively for the purposes of banking supervision or anti-money laundering and terrorist financing.
3.4. When necessary, banking supervisory authorities will assist each other in obtaining information:
— on resident legal entities and private individuals in the Russian Federation and Ukraine that are founders (members) of credit institutions;
- confirming the compliance with fitness and propriety requirements by managers of credit institutions (candidates for the positions of managers of credit institutions);
- other information.
3.5. Co-operation within the framework of this Agreement shall be conducted at the initiative of a banking supervisory authority on the basis of a request for assistance (hereinafter referred to as “a request”).
3.6. A request shall be made in writing. Any type of communication facilities may be used to transmit a request.
3.7. An assistance within the framework of this Agreement may be refused wholly or in part if the requested banking supervisory authority believes that the fulfilment of the request contravenes its national legislation or runs counter to the interests of the state. In this case, the requesting banking supervisory authority shall be notified in writing and given the reasons for the refusal.
3.8. Each banking supervisory authority shall do everything 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 fulfilment of the request.
3.9. Each banking supervisory authority shall bear the expenses that may arise in implementing this Agreement unless a different procedure is agreed upon.
4. Ensuring the Confidentiality of Information
4.1. The banking supervisory authorities shall take appropriate measures to ensure the confidentiality of information or documents in keeping, using and transmitting it to each other by any type of communication facilities.
4.2. Confidential information provided within the framework of this Agreement may not be used without the consent of the banking 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 banking supervisory authority that has provided confidential information, except for the cases, when the obligation to provide information is stipulated by law.
4.4. Should this Agreement be terminated, the supervisory information received within the framework of this Agreement shall remain confidential.
5.1. An application of a home supervised institution to a host supervisor regarding the issue of a licence (permission) on opening of a cross-border establishment (hereinafter referred to as “an 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. Upon the receipt of a request, the home supervisor shall submit to the host supervisor the following information on a supervised parent institution to take a decision on the application:
- the date of a state registration;
- the activities stipulated by a banking licence;
- the structure of a banking group (banking holding), management bodies of the supervised parent institution, data on shareholders (members), subsidiary credit institutions, related persons, as well as representative offices;
- the management structure and the internal control system;
- other information required for taking a decision on opening a cross-border establishment, including information that may be provided within the framework of this Agreement on the financial soundness of a supervised parent institution and its compliance with anti-money laundering and terrorist financing laws.
6. Co-operation Regarding Permission for the Acquisition of Shares (Stakes) of a Supervised Institution
6.1. The banking supervisory authorities shall inform each other on granting or refusing permission with regard to the acquisition of shares (stakes) of a supervised institution registered in the other country. The home supervisor of a supervised institution that has applied for such permission shall provide, upon request from the host supervisor, information available to it on the said supervised institution and required for taking a decision.
6.2. For the purposes of this Agreement, an acquisition signifies a purchase of shares (stakes) of a supervised institution registered in the Russian Federation or in Ukraine, of a size that will require, under the national legislation, preliminary agreement with the respective banking supervisory authority.
7. Co-operation in Ongoing Supervision of Cross-Border Establishments
7.1. The host supervisor shall carry out banking supervision of cross-border establishments in accordance with the national legislation.
7.2. The host supervisor shall not obstruct the provision of information and reporting by cross-border establishments to a supervised parent institution required for consolidated supervision and consolidated reporting as per the forms established in the home country.
7.3. The home supervisor in respect of supervised parent institutions and the host supervisor in respect of cross-border establishments shall, upon corresponding requests, provide the following information on a mutual basis:
- on indicators characterising the financial soundness of supervised parent institutions and their cross-border establishments;
- on violations of the banking legislation committed by supervised parent institutions and their cross-border establishments, including anti-money laundering and terrorist financing laws;
- on measures, which the banking supervisory authorities apply in relation to supervised parent institutions or their cross-border establishments.
8. Co-operation in Conducting On-Site Inspections
8.1. The home supervisor shall regulate on its own the relations with cross-border establishments in respect to the access of its representatives for conducting on-site inspections.
8.2. The home supervisor will notify the host supervisor in advance about the intention to conduct an on-site inspection in the host country, giving the name of a cross-border establishment, the purpose and issues of the inspection and its expected duration, and the names of inspectors.
8.3. The banking supervisory authorities shall inform each other timely and within the framework permitted by their national legislations about the results of inspections if they are of interest for the host supervisor.
9. Co-operation on Anti-Money Laundering and Terrorist Financing
9.1. The banking supervisory authorities to fulfil their supervisory duties shall exchange the information:
- on national banking laws and regulations in the field of anti-money laundering and terrorist financing and changes therein;
- on the practice of identifying and scrutinizing clients and beneficiaries, revealing operations related to money laundering and terrorist financing;
- on the observance by parent supervised institutions or their cross-border establishments of the national legislation of home or host countries in the field of anti-money laundering and terrorist financing, and also on measures taken in the case of the breach of the respective legislation;
- on typical money laundering and terrorist financing schemes.
10. Other Provisions
10.1. If necessary, the banking supervisory authorities shall meet to discuss and settle matters of mutual interest and also the issues of improving banking supervision of parent institutions and their cross-border establishments. The issues relating to the implementation of this Agreement may also be discussed at such meetings.
10.2. Disagreements that may arise out of the fulfilment of this Agreement shall be resolved by way of consultations and negotiations.
10.3. This Agreement shall come into force as of its signing and it will remain effective until one of the banking supervisory authorities notifies in advance (30 days) the other in writing about its decision to terminate it. In this case, this Agreement shall remain in effect for 30 days after the notification date. Requests for assistance made before that date shall be fulfilled by the banking supervisory authorities in compliance with the terms and conditions of this Agreement.
10.4. The banking supervisory authorities shall provide for the possibility to make changes and additions to this Agreement to ensure compliance with the national legislation and banking regulations.
10.5. 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 National Bank of Ukraine, banking system, laws and regulations of Ukraine may be found on the National Bank of Ukraine website at www.bank.gov.ua.
10.6. This Agreement is done in two copies in the Russian language and two copies in the Ukrainian language, with all the copies being identical and having the status of original copies.