Proportionate regulation: 149 banks have basic licences

The transitional period, in which Russian banks with capital of less than 1 billion rubles had to either build up their capital to no less than 1 billion rubles or change their status to that of a bank with a basic licence or a non-bank credit institution, came to an end in December 2018.

The regulator reviewed banks’ documents to make a decision on the state registration of the respective amendments to their charters. As of 30 December 2018, the Bank of Russia had changed the licences of 149 operating banks due to their gaining a new status as banks with a basic licence. Three banks with a universal licence changed their status to that of a non-bank credit institution.

The Bank of Russia completed planned works to adjust regulation with due account of the proportionate approach. Banks with a basic licence enjoy simplified regulation compared to the new and technically advanced standards applied to banks with a universal licence. Banks with a basic licence must only comply with five required ratios (two capital adequacy ratios, one liquidity ratio, and two credit risk concentration ratios) and they are subject to simplified requirements for information disclosure and reporting. Moreover, these banks are not required to calculate and comply with the financial leverage ratio and capital buffers.

To protect them from assuming higher risks and taking into account their small capital, banks with a basic licence are prohibited from conducting a number of operations with foreign persons and opening accounts with foreign banks, except for accounts in order to participate in foreign payment systems. On 6 January 2019, the Bank of Russia ordinance on extending the list of securities, which banks with a basic licence are entitled to conduct transactions with, takes effect.

The target customer segment for banks with a basic licence are small and medium-sized enterprises and the general public.The construction of a business model for banks with a basic licence aims at improving financial inclusion in regions across Russia, which will be conducive to the recovery of regional economic growth.