Central Bank Gains New Powers To Supervise Financial Institutions
Legal update No 649
Bryan Cave Leighton Paisner (Russia) LLP advises that Federal Law No. 263-FZ dated 29 July 2018 gives the Central Bank of Russia (the “Central Bank”) significant new supervisory powers.
From 1 January 2019, the Law will permit the Central Bank to perform so-called “test transactions”. Central Bank officials may enter into transactions or start negotiations on entering into transactions in the ordinary course of business of a credit or non-banking financial institution (e.g., bank, broker, dealer or insurance company) in order to test its compliance with the legislation. For instance, a Central Bank official may impersonate a potential client planning to obtain some banking services.
A “test transaction” may be carried out either on the institution’s premises or remotely.
The Central Bank may conduct such an inspection only when:
it has reason to believe that an institution’s operations might cause damage to its creditors, depositors or customers or jeopardise their legitimate interests; or
it discovers evidence of violation of the Russian legislation, Central Bank regulations or the rights of clients.
A “test transaction” is conducted without prior notification of the institution.
For an on-site inspection, two witnesses must be present or a video-recording or photo-record be made.
The Chairman or Vice-Chairman of the Central Bank is entitled to authorise a “test transaction”.
The Central Bank must prepare a report on the results of the inspection and deliver it to the institution within ten business days.
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