Bank of Russia drafts 2021–2024 roadmap to enhance credit cooperation regulation
The draft provides for, among other things, the launch of a special procedure for admitting credit consumer cooperatives (CCCs) to the financial market. A legal entity will be allowed to receive the status of a CCC only when the Bank of Russia puts it on the state register. To submit documents for such registration, the entity should undergo a preliminary audit at a self-regulatory organisation of CCCs.
The draft also implies tougher requirements for CCC management bodies’ business reputation and qualification. Besides, the regulator plans to analyse opportunities for creating mechanisms that would protect credit cooperative members’ personal savings and to enhance the quality of credit cooperatives’ corporate governance framework and their risk management and internal control system. These areas of work were discussed at the meeting of the Expert Council for Microfinance and Credit Cooperation under the Bank of Russia. The list of measures within the roadmap will be expanded after the review of suggestions made at the meeting.
Expert and human rights organisations’ representatives who took part in the meeting proposed a range of measures to protect the rights and interests of people joining the cooperative movement and people deceived by fraudsters posing as legal financial market participants. The implementation of a considerable part of such measures will require an extensive engagement of law enforcement agencies to combat unfair practices in credit cooperation.
The roadmap measures and additional efforts will help increase the transparency of credit cooperation, make this industry more attractive for unit holders and more secure as regards the use of its financial products, and promote confidence towards it in society and among consumers.
Another important issue discussed at the meeting was the application of the debt service-to-income ratio (DSTI) by microfinance organisations (MFOs) to control borrowers’ debt burden and limit loan disbursements to customers with high DSTI. Based on MFOs’ experience in DSTI calculation, speakers showed the correlation between overdue debt, information on income submitted by a borrower in a loan application, and the borrower’s DSTI. The Bank of Russia will consider market participants’ suggestions on enhancing the DSTI regulation.