Russia announces changes in banking supervision and restructuring troubled banks

The weeding out of weak players in the banking sector has meant that the amount of support funds needed by Russia's Deposit Insurance Agency (DIA) has grown continuously as the DIA has received an increasing number of deposit insurance claims for failed banks, and has dealt with the costs of terminating or restructuring sick banks. Since the end of 2015, the DIA has largely relied on Central Bank of Russia funding to cover its liabilities. In 2016, CBR loans covered about 70 % of the DIA's 660 billion rubles (about €9 billion) in expenditures. The Duma last week approved a bill that will shift the responsibility for dealing with troubled banks to the CBR. The change is hoped to improve the effectiveness of bank restructurings and slow the pace of rising costs.

At the same time, the Duma approved a law on changes in bank licensing. From the start of 2018, banks will have either general or basic operating licences. A basic licence grants the right to engage in limited banking activities, and reduces the supervisory burden. The minimum capital requirement is 300 million rubles for a basic licence and 1 billion rubles for a general licence. Banks operating on a basic licence are believed to focus on regional banking and financing small and medium-sized firms. Banks with equity exceeding 3 billion rubles must have a general licence and are subject to full supervision. Russia had about 160 such banks at the beginning of March. The reform should clarify supervision and allow supervision to focus on the systemically most important banks. The law includes a 1-year transition period.

The Duma quickly passed both bills on unanimous votes, signalling broad political support.