The Bank of Russia intends to introduce a special approach to regional banks and discuss the issue of simplifying regulations for such banks with the banking community, announced Central Bank Governor Elvira Nabiullina.
“In our view, there is a need to implement proportional control in the banking sector, meaning that the strictness of the requirements applied to a bank must be in line with the range of banking operations carried out by that bank and the scope of risks assumed by it. To this end, we propose the introduction of the regional bank as a new type of lending organization”, Ms. Nabiullina said at the International Financial Congress.
“Relatively small lending organizations performing a limited number of simple banking operations may be categorized as regional credit institutions. The business model for such banks must consist of raising funds from individuals and legal entities in a particular region and loaning such funds to individuals and businesses, especially small and medium-sized businesses, with minimal risks involved”, she added.
Such banks will not be allowed to conduct cross-border transactions or open branches or business divisions outside the region in which they are registered, Ms. Nabiullina indicated.
“We deem it appropriate to discuss with the banking community a significant simplification of the regulations governing such banks, aiming to abolish the need for them to comply with technically complex standards […] It is important to emphasize that this is not about softening regulations for banks, but rather about streamlining them”, she added.