Granting bank access to state resources, credit ratings should be used

Andrey Kashevarov put forward the idea at the XV International Banking Forum

On 14-15 September, the Regional Banks Association organized the “Russian Banks – the XXI century” Forum in Sochi. The antimonopoly body was represented by Deputy Head of FAS Andrey Kashevarov, who was a speaker at the II session – a panel discussion about “Control and regulation in the finance industry: adequacy, proportionality and efficiency”. His report was about “Regulation and competition on the market of banking services”.

Apart from FAS officers the event is traditionally attended by representatives of the State Duma and the Federation Council of the Federal Assembly of the Russian Federation, the Ministry of Finances, the Bank of Russia, other ministries and departments, as well as the leading financial market analysts, top-managers of banks and other companies.

Andrey Kashevarov started his speech with information about the level of economic concentration on the market of banking services. He reminded that, except some cases, in the recent years this level has constantly remained high. Once again, he specially emphasized that more than half of all services offers on the analyzed markets fall upon the three largest banks.

In this context, Deputy Head of FAS pointed out that FAS together with the Bank of Russia may review the procedure for transactions by credit organizations with state participation in the authorized capital in order to reduce such participation in the banking system.

Then Andrey Kashevarov discussed in detail the current major issue in regulating the market of banking services: legislative and other regulatory acts have provisions that create unreasonable advantages for large banks fixing requirements to credit organizations for providing banking services.

According to Deputy Head of FAS, currently there are at least 51 federal acts, setting different requirements to banks, for instance, the size of own funds, state participation in the authorized capital or contracts with “Deposit Insurance Agency” State Corporation for additional capitalization

As stated by Andrey Kashevarov, taking into account only the size of own funds, the number of credit organizations able to offer some kind of services to the state will be from 7 to around 38 organizations; when evaluation is based on all established requirements, sometime only two credit organizations meet them.

In the speaker’s opinion, the established regulatory framework coupled with the complexity of operations on the banking market, encourages the regional authorities to give advantages to large state banks and stimulate unfair conduct of other participants of the financial market.

Deputy Head of FAS also reiterated that this situation allows the largest market payers to considerably decrease the interest rates on private deposits preserving relatively high credit rates, and influence the overall conditions for services turnover on the markets, including the value terms for consumer loans.

Outlining FAS proposals addressing the issue, the speaker said: “In line with the new regulation of rating activity, credit ratings should be used instead of the size of own funds as a requirement for banks to provide access to state resources. The bank size does not matter”.

Andrey Kashevarov underlined the need for a restriction at 10% share of a single creditor per average market full loan value, which, in its turn, by law cannot be exceeded by market participants by more than one third.

The main agenda of 2017 Forum included: modern trends in developing the financial-and-banking industry, new formats of its control and regulation, strategies and business-models for developing financial services, cyber-risks and security of national payment instruments.