Russia's CBR gets tough on banks, demands they reveal owners' identities

Russia's CBR gets tough on banks, demands they reveal owners' identities
CBR governor Elvira Nabiullina is getting tough on banks
By bne IntelliNews September 12, 2017

The Central Bank of Russia (CBR) will demand that all of Russia's banks fully disclose the identities of their owners from the start of 2018, Kommersant daily reported on September 11 citing the draft order prepared by the regulator.

Currently banks only need to disclose their ownership structure. Pension funds, asset management funds and micro-finance organisations reportedly will also have to do the same as of January 2018.

In the same week the CBR has consolidated the regulating functions and stepped up its enforcement under governor Elvira Nabiullina. She said the central bank is concerned with the remote trading of complex financial instruments to a wide number of unqualified traders.

This is not the first time the CBR has tried to introduce some more transparency into the ownership of banks. However, while progress has been made, the new rules are much more explicitly focused on what the Russians call "fizlits" (a contraction of the words for "physical face" - or an actual person). Russia's banks have to comply with the CBR demands and have already been publishing the ownership structure on the website of the central bank for the last seven years, with a delay of 10 days to update changes. 

The new rules strike to the heart of the most serious problem in the Russian banking sector: owners' proclivity to make loans to themselves and then default on those loans. The CBR seems to be closing down what has been a daylight robbery scam that has cost the state tens of billions of dollars bailing out failed banks. Most recently Nabiullina warned the banks against crediting their owners and reiterated regulator's strict commitment to the sector clean-up, Vedomosti daily reported on September 1.

Nabiullina said: "If the owners of a bank's model is to make loans to the owners then we advise you seriously rethink it," in what is the clearest call for banks to clean up their act of her tenure as governor. 

The statement was a clear threat to Russian bankers, who have routinely been stripping their banks of depositors' money by making fake loans to themselves. Russia spent some $18bn last year on reimbursing depositors with banks that were typically found to have up to $1bn holes in their balance sheet. 

Kommersant notes, however, that in many cases fake identities or shell companies were used to report the owners in small banks, many of which have been closed by the CBR, and so far the central bank had not sanctioned any banks for false ownership disclosure.

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