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Central Bank’s New Approach to Bank Oversight
18.02.2015 12:00 / vedomosti.ru
Bank assets valuation should be substantial, constituting an expert opinion on their quality and potential losses, stresses the CB.
All problem assets should be ‘constantly monitored’ and measures should be taken to rectify the situation, states the Central Bank letter.
The CB sets out a number of requirements to bank shareholder companies. If the regulator receives information on a company’s deteriorated financial standing, it may request additional documents from the company. In the event of shareholder’s inadequate financial standing being confirmed, the CB will issue a 90-day warning. If the company fails to rectify the situation, it may lose its vote as a shareholder.
“This set of measures and recommendations is a major breakthrough in oversight. Essentially, the CB wants to switch from formal to substantial approach, issuing direct recommendation to its branches to follow their own assessment, even if it is more drastic than required formally”, comments a banker. Another banker says that the CB letter is a step towards more thorough oversight and ‘positively a tighter one’. Normally functioning banks have nothing to fear, while problem banks must prepare for a hard time, says a source close to the CB.