MEMORANDUM OF UNDERSTANDING ON COOPERATION CONCERNING SHARING OF INFORMATION BETWEEN THE CENTRAL BANK OF THE RUSSIAN FEDERATION AND THE SUPERINTENDENCE OF BANKS AND OTHER FINANCIAL INSTITUTIONS OF THE BOLIVARIAN REPUBLIC OF VENEZUELA
The Central Bank of the Russian Federation, domiciled in Moscow, represented by its First Deputy Chairman Gennady G. Melikiyan, hereinafter referred to as the Bank of Russia, on the one hand, and, on the other, The Superintendence of Banks and Other Financial Institutions of the Bolivarian Republic of Venezuela, governmental entity pursuant of the laws of the Bolivarian Republic of Venezuela, domiciled in Caracas, properly represented by the Superintendent Trino A. Diaz, Venezuelan citizen, of legal age, domiciled in Caracas, owner of the ID. ? 957164, designated through the Decree ? 2829 dated on February 13th, 2004, published in the Official Gazette of the Bolivarian Republic of Venezuela ? 37879 of the same date, hereinafter, SUDEBAN, herein both referred to as the Authorities.
Considering the willingness of strengthening the cooperation and bilateral relations which join both nations, on the basis of reciprocity as well as mutual trust and understanding;
Desiring of ruling the supervision of the banking performances of the authorized establishments in order to undertake the aforementioned activities;
Bearing in mind the principles and procedures outlined in this Memorandum of Understanding, in order to facilitate the performance of the respective duties and to promote the adequate functioning of the Supervised Institutions in the Bolivarian Republic of Venezuela and the Russian Federation, according to their national legislation.
Have agreed on the following:
The Powers of the Authorities
1.1 The Bolivarian Republic of Venezuela:
SUDEBAN, is in charge of the inspection, supervision, vigilance, regulation and control of the banks and other financial institutions of banking business carried on in the Bolivarian Republic of Venezuela, pursuant to the Decree with Reform of Law Force of the General Law of Banks and Other Financial Institutions published in the Official Gazette of the Bolivarian Republic of Venezuela ? 5.555, dated on November 13th, 2001.
1.2 The Russian Federation:
Under the law of the Russian Federation, the Bank of Russia is a banking regulatory and Supervisory Authority. It constantly monitors compliance by credit institutions and banking groups (bank holding companies), with banking legislation, and the rules and regulations and required ratios of the Bank of Russia. To perform its regulatory and supervisory functions, the Bank of Russia conducts on-site inspections of credit institutions and their branches, sends them mandatory prescriptions to eliminate the shortcomings discovered in their work and takes measures to credit institutions stipulated by the Federal Law on the Central Bank of the Russian Federation (Bank of Russia).
Notions and Terms
For the purpose of this Memorandum of Understanding, the terms used below signify as follows:
2.1 “Supervised Institution”: is a legal entity that has the right to conduct banking operations and whose activities are subject to licensing and banking supervision under the law of the Bolivarian Republic of Venezuela or the Russian Federation.
2.1.1 In the Bolivarian Republic of Venezuela:
“Banks, Savings and Loan Entities and others Financial Institutions”: are those that carry out operations of financial mediation, which consist in the collecting of resources, including money desks, with the purpose of offering credits or financing, and of carrying out investments in values.
The types of existing banks in the Bolivarian Republic de Venezuela accordingly predicted in the Decree with Reform of Law Force of the General Law of Banks and Other Financial Institutions are: the universal banks, commercial banks, mortgage banks, investment banks, banks of development and second floor banks. The types of financial institutions are: leasing institutions and monetary market funds.
The natural or legal persons that devote themselves, regular or habitually, to the granting of credits or performing discounts or investments with their own funds, do not need any authorization to carry out that activity, nevertheless they are obliged to provide SUDEBAN with statistical data, financial statements and any other occasional and periodic information that could be required.
2.1.2 In the Russian Federation:
“Credit Institution”: is a legal entity whose principal objective is to derive profit on the basis of a special permit (license) issued by the Bank of Russia. It has the right 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 an economy entity.
“Bank”: is a credit institution that has the exclusive right to conduct all of the following banking operations: to take personal and corporate funds on deposit, to place these funds on its own behalf and at its own expense on a repayable interest-paying and terminable basis and to open and keep personal and corporate accounts.
“Non-Bank Credit Institution”: is a credit institution that has the right to conduct some of the banking operations stipulated by the Federal Law on Banks and Banking Activities. The Bank of Russia establishes permissible combinations of banking operations for non-bank credit institutions.
2.2 “Parent Supervised Institution(s)”: is a supervised institution that is registered as a legal entity in one state and has a cross-border establishment in another state.
2.3 “Financial, Banking and Consolidated Group”:
2.3.1 In the Bolivarian Republic of Venezuela:
“Financial group”: is the assembly of banks, savings and loan entities, other financial institutions and other company that constitute a unit of decision or management based on the criteria explicitly established in the national legislation.
2.3.2 In the Russian Federation:
“Banking group”: is an association of credits institutions that is not a legal entity, in which one (parent) credit institution exerts material influence directly or indirectly (through a third person) on the decisions taken by management of other credit institution or institutions.
“Consolidated group”: is an association of legal entities, that is not a legal entity, in which one (parent) credit institution exerts material influence directly or indirectly (through a third person) on the decisions taken by management of other legal entity or entities, or non credit institution or institutions.
2.4 Cross-Border Establishment:
2.4.1 In the Bolivarian Republic of Venezuela:
“The Participation of the Foreign Investment in the National Financial Mediation”: can be carried out by means of:
d. The acquisition of share in banks, savings and loan entities and other existing financial institutions.
e. The establishment of banks, savings and loan entities and other financial institutions property of banks or foreign investors.
f. The establishment of bank branch offices and foreign financial institutions.
“Representative Office”: is an establishment located abroad of the country where the banks are constituted, that acts as a link among those represented by it and the natural and legal persons beneficiaries of credits that could be granted. The offices of representation will not be able to receive deposits of any type neither direct or indirectly on behalf of its own or a third person, neither to intervene in the execution of passive operations that imply collecting resources of the public, to which end they have to abstain from providing information either to perform formalities or any procedure related to this type of operations.
2.4.2 In the Russian Federation:
In the Russian Federation, foreign banks may establish subsidiary credit institutions-residents of the Russian Federation, or participate otherwise in the authorized capital of a Russian Federation resident credit institution and open representative offices. The activities of credit institutions with foreign interest should be licensed in compliance with the requirements of the Russian legislation.
Pursuant to Russian legislation:
“Subsidiary credit institution”: is a legal entity whose decisions can be determined by the supervised parent institution, owing to its controlling stake in authorized capital or under the agreement concluded between them or otherwise.
“Representative Office of a credit institution”: is a separate unit located outside the residence of the supervised parent institution that represents and protects its interest. A representative office of a credit institution has no right to conduct banking operations. It is not legal entity and operates according to the rules set by the credit institution that established it.
2.5 “Home Supervisor”: is the supervisory Authority located in the Bolivarian Republic of Venezuela or in the Russian Federation, where the Supervised Parent Institution is registered.
2.6 “Host Supervisor”: is the Supervisory Authority located in the Bolivarian Republic of Venezuela or in the Russian Federation, where the Cross-Border Establishment is registered.
2.7 “On-Site Inspection(s)”: the official visits of inspection carried out at a Cross-Border Establishment by the Home Supervisor, through the duly authorized officers and/or examiners commissioned by the Home Supervisor.
Sharing of Information
The sharing of information within the framework of this Memorandum of Understanding shall be conducted on the basis of a request for assistance. A request for assistance shall be made in writing.
In that sense the Authorities will be able to:
3.1 Share information on the state and development of national banking sector, the requirements of national legislation on banking supervision and the changes made therein.
3.2 Share information received in the course of supervising institutions and cross-border establishments.
3.3 Provide the necessary information to one another with the purpose of identifying the real owners of supervised institutions. If the Authorities do not have the requested information, they must do everything to receive it.
3.4 Notify one another in time about the application, by a supervised institution, to be granted a license (permit) to open a Cross-Border Establishment or acquire shares (stakes) in a credit institution registered in the other country (hereinafter referred to as the request). At the request of the Host Supervisor the Home Supervisor shall provide information necessary for taking the decision on the application.
3.5 Upon the receipt of the application, the Host Supervisor shall inform the Home Supervisor about its content and after examining it, the Host Supervisor shall inform the Home Supervisor in writing about the results of the examination. Information that should be passed under this Memorandum of Understanding shall not be limited to financial data and it may include other kinds of information, such as the organizational structure of a Supervised Institution and its management and internal controls, and any other information that may be used for due supervision of the Supervised Institution or a financial, banking, consolidated group as a whole.
3.6 Information shared within the framework of this Memorandum of Understanding shall be provided and used for the sole purpose of prudential (off-site) supervision of the activities of a Supervised Institution or a financial, banking or consolidated group in which it is incorporated.
3.7 Information shared by the Authorities within the framework of this Memorandum of Understanding shall not contain the names of the depositors of Supervised Institutions, except the cases in which the provision of such information is stipulated by legislation of the Bolivarian Republic of Venezuela and the Russian Federation.
3.8 The purpose of requesting information by one Authority should be reported to the other Authority.
3.9 Information requested under this Memorandum of Understanding shall be provided within thirty (30) working days following the request date, taking into consideration the nature of the information and the established terms. Should they need more time to respond to the request, The Authorities shall notify one another about this within ten (10) days before the expiry date of the aforementioned term.
Cooperation in ongoing supervision
4.1 SUDEBAN and the Bank of Russia intend to discuss with each other any significant information on Supervised 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 a Supervised Institution (failure to meet or decrease of the 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 Institution or other regulatory body (subject to obtaining any necessary consent from any such regulatory body), concerns arising from the latter 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). They also commit to notify each other about the actions taken concerning these Cross-Border Establishments as Host Supervisor or on the Parent Supervised Institution as Home Supervisor.
4.2 Representatives of SUDEBAN and the Bank of Russia will endeavor to convene ad-hoc meetings to promote the resolution of supervisory problems concerning a Cross-Border Establishment in the respective other jurisdiction, provided that the concerned Authority base its demand on a supervisory concern.
The Authorities shall inform each other without delay if they learn of an incipient crisis related to any Supervised Institution supervised by either, which has Cross-Border Establishments in the other respective jurisdiction.
6.1 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 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.
6.2 The Authorities will notify each other in advance of any On-Site Inspection, giving details of the names of the examiners, the purpose of the inspection and its expected duration. 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 Parent Supervised Institutions has been inspected along with its Cross-Border Establishment in the other jurisdiction, the Home Supervisor will endeavor to provide the Host Supervisor with information relevant to the Cross-Border Establishment, which will assist the Host Supervisor in exercising its functions.
Countering money laundering and terrorism financing
To share information in the field of countering money laundering and terrorism financing, including information on:
— the requirements of national legislation in the field of countering money laundering and terrorism financing, which fall within the competence of supervisory authorities;
— the best practice in the identification and examination of customers and beneficiaries and the detection of operations connected with money laundering and terrorism financing;
— typical schemes and methods used to launder money and finance terrorism;
— violations of banking legislation and legislation on anti-money laundering and terrorism financing committed by supervised institutions and sanctions used against them.
Confidentiality of the Information
8.1 Information shared shall be used for banking supervision only and be subject to the legislative restrictions relating to banking/official secrecy in conformity with the applicable legal norms of the Bolivarian Republic of Venezuela and the Russian Federation.
8.2 The Authorities shall take the necessary measures to ensure confidentiality of information or documents received from other Authority when keeping, using and passing them to one another by any means of communication.
8.3 Information received by one Authority may not be passed to third persons unless the Authority that provided it has given its consent in writing.
8.4 Should this Memorandum of Understanding be terminated, supervisory information received within its framework shall continue to be considered confidential.
8.5 The Authorities commit to comply 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 which constitutes a necessary condition for a successful cooperation between the Authorities. The Authorities agree that any confidential information shared through these arrangements will be used only for lawful supervisory purposes.
9.1 In order to enhance the quality of co-operation, representatives SUDEBAN and the Bank of Russia commit themselves to convene periodically to discuss issues concerning Supervised Institutions which maintain Cross-Border Establishments within their respective jurisdictions.
9.2 Written requests shall be addressed to the Cooperation and Understanding Office in the case of the SUDEBAN, and to the Director of the External and Public Relations Department, in the case of the Bank of Russia.
9.3 The Authorities commit themselves to ensure that they send each other information about the lists of licensed Supervised Institutions subject to supervision. They also commit themselves 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.
9.4 This Memorandum of Understanding constitutes an obligation to The Authorities in achieving the objective set in this instrument 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 of the Authorities or 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.
9.5 Without prejudice to paragraph 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 SUDEBAN or the Bank of Russia 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.
10.1 If necessary, The Authorities shall meet to discuss and determine the range of additional issues concerning the implementation of this Memorandum of Understanding.
10.2 To ensure co-operation after the coming into force of this Memorandum of Understanding, The Authorities shall exchange lists of contact persons (indicating their full names, job titles, telephone and fax numbers and e-mail addresses).
10.3 Information about SUDEBAN, the banking system, laws and legal acts of the Bolivarian Republic of Venezuela are available on the SUDEBAN website at www.sudeban.gob.ve.
Information about the Bank of Russia, the banking system, laws and legal acts of the Russian Federation are available on the Bank of Russia website at www.cbr.ru.
The SUDEBAN and the Bank of Russia do not object to posting of this Memorandum of Understanding on their websites.
10.4 Amendments may be made to this Memorandum by mutual consent of the Parties. The amendments made pursuant to this provision shall come into force as of the date on which they were agreed upon.
11.1 This Memorandum of Understanding shall be modified by the Authorities’ mutual consent. The modifications, which may result from the application of this article, shall come into force on the agreed date.
11.2 Should any doubts or differences arise about the application, implementation and interpretation of this Memorandum of Understanding, they shall be settled by mutual agreement through direct negotiations between The Authorities.
11.3 This Memorandum shall come into force as of the date of its signing and remain in effect for 5 (five) years, being able to be prolonged subject to the consent in writing among the Parties within 90 (ninety) days of anticipation to the date of its expiration.
11.4 Each of the Party may terminate this Memorandum at any time by notifying the other Party in writing. The termination of this Memorandum shall come into force 3 (three) months after the notification of the other Party.
11.5 The termination of this Memorandum shall not effect the carrying out of arrangements that will be in the process of implementation at the time of the termination of this Memorandum.
This Memorandum of Understanding is done in 2 (two) copies in the English language. Both copies are authentic and each Party shall be responsible for translation into its own language.
By the Central Bank
First Deputy Chairman
Caracas, October 26 , 2007
Superintendence of Banks and
Dr. Trino A. Diaz
Caracas, October 26 , 2007