Russian Central Bank ready to allow banks with a basic license to operate with shares of non-residents, but with restrictions

MOSCOW. March 30 (Interfax) - The Russian Central Bank plans to provide banks holding a basic license with the opportunity to acquire shares and stakes in foreign legal entities, but with certain restrictions, Deputy Chairman of the Central Bank Olga Polyakova said.

"We plan to allow banks with a basic license to dispose of securities with which they are not entitled to work, and expand the list of securities available to banks with a basic license, including allowing them to work with securities from any exchange," she said, speaking at the XIX Interregional "The Regional Financial Market: Its Condition and Prospects and Role in the Socio-Economic Development of Regions" conference.

"We plan to regulate the use of derivative financial instruments for banks with a basic license so that they do not take unnecessary risks, and provide banks with a basic license and non-bank credit organizations the opportunity to purchase shares and participation interests in foreign legal entities with certain restrictions. This is also a very important initiative, which at the current time can be useful," Polyakova added.

She recalled that for banks with a basic license, a temporary permit exists to open correspondent accounts abroad. "We are hearing about the need to extend this measure, and we are ready to further evaluate and discuss it," Polyakova said.

In addition, the Central Bank is currently discussing the concept of special banking communities organized on a "franchise" basis.

"We plan to come out with more specific proposals for discussing this issue in May on the association's website," Polyakova said.

The Central Bank already announced it was studying this issue in December last year in a document on promising areas for the development of banking regulation and supervision.

"If banks - members of such communities agree on a certain level of mutual responsibility and mutual assistance, common rules for doing business and managing risks, we can consider them as one group and significantly reduce the individual regulatory burden for "franchisee" participants. In this respect, a new business model will emerge on the market that will allow small and regional banks to pool resources, preserve capital (no buyout required) and optimize costs without losing a certain degree of operational independence. At the same time, it is supposed to increase the attention paid by SME's to lending from these associations," the document said.