Basic standards: financial market transactions of consumer credit cooperatives and risk management in microfinance organisations

The Bank of Russia has approved two new basic standards.

The standard for financial market transactions of consumer credit cooperatives establishes the conditions and procedures they should follow when raising funds from individual members of consumer credit cooperatives (unit holders) under personal savings transfer agreements. The document also provides requirements for issuing mortgage loans (including those repaid from maternity capital) and concluding surety and pledge agreements by consumer credit cooperatives.

This standard will harmonize financial market transactions of consumer credit cooperatives, eliminate potentially unfair practices, ensure more effective financial consumer protection and have a positive impact on overall sector development. The document was drawn up by self-regulatory umbrella organisations for consumer credit cooperatives in the financial market.

The standard for risk management in microfinance organisations was worked out on the basis of best practices by self-regulatory umbrella organisations for microfinance organisations in the financial market. It establishes requirements for the organisation of risk management, lists primary risks and determines the relevant functions and internal procedures of organisations. All microfinance organisations and major microcredit companies will have to establish separate risk management divisions. The standard is aimed at developing an effective risk management model for microfinance organisations, which would in turn have a positive impact on organisations’ financial stability, as well as the quality and cost of their services.

Both documents will be binding for all consumer credit cooperatives and microfinance organisations, irrespective of their membership in self-regulatory umbrella organisations of consumer credit cooperatives and microfinance organisations, no later than 180 days after it is published on the Bank of Russia website.