12 August 2013, 00:00

System supervision of the Central Bank

The Central Bank allocates supervision of systemically important banks to a separate unit, returning to the experience of 1996-1998. Olga Plotonova Dmitry Kazmin Yuri Nekhaychuk D. Abramov / Vedomosti

On Friday, the Board of Directors of the Central Bank decided to create a department for supervision of systemically important credit institutions from October 1, the Central Bank said in a statement. It will be headed by Deputy Director of the Banking Supervision Department Mikhail Kovrigin.

The regional headquarters of the Central Bank (primarily the Moscow one) will gradually transfer to the new department the powers to supervise individual banks - the Central Bank expects this to take a year. In total, there may be about 20 systemically important banks. The criteria for banks over which special supervision is supposed to be exercised will become known at the end of 2013 - beginning of 2014, it follows from the message of the Central Bank; the normative act establishing them is still being developed.

The 20 largest banks consolidate more than 70% of the assets and liabilities of the banking sector, the regulator emphasized, the new division will ensure proportionality between the systemic importance of individual banks and the nature of the supervisory activities of the Central Bank.

The Central Bank already has a list of systemically important financial institutions for internal use, Vladimir Chistyukhin, director of the Central Bank department, said in June: “These are 18 of the largest credit institutions by certain parameters and two systemically important infrastructures - NSD (central depository) and there will be NCC (central counterparty).” . On Friday, the Central Bank noted that the scope of its increased attention covers over 200 banks of the “second circuit” of supervision, which includes both all systemically important credit institutions, as well as regional players that are noticeable in terms of the size of deposits and assets.

The idea of recreating OPERU-2 - the department for working with the largest banks, which operated in 1996-1998 - has been discussed since the spring, two people close to the Central Bank told Vedomosti. Under his supervision there were 14 largest banks, concentrating 2/3 of the assets and 90% of the population's deposits. At the same time, banks were guaranteed state support. But during the 1998 crisis, this did not help; the Central Bank had to provide stabilization loans to a number of banks, and some of OPERU-2’s clients went bankrupt. With the arrival of Viktor Gerashchenko at the Central Bank, OPERA-2 was merged with the Moscow territorial directorate.

“The creation of OPERU-2 was useful, we received clear and necessary information from banks, this allowed us to fairly soberly assess the situation and the risks that threatened the system,” recalls Sergei Dubinin, Chairman of the VTB Supervisory Board, in 1995-1998. Chairman of the Central Bank.

Systemically important banks deserve to be dealt with in a separate department, Dubinin is sure, at least because their branches are located throughout the country. In addition, they differ from smaller players, continues the ex-Chairman of the Central Bank: “Now systemically important banks are practically holding companies, conglomerates, which include insurance, leasing companies, investment areas, and operate in the dealer and brokerage markets. And the re-creation of OPERU-2 is the intersection of the tasks of the Central Bank and the mega-regulator being formed, in fact, the creation of a division that should take on the functions of prudential supervision.”

VTB President Andrei Kostin suggested publicly returning to this approach: “We could think about recreating OPERU-2: we [the largest banks] still have to resolve the main issues at Neglinka, all the same - in Simanovsky’s office or some other. But double control [taking into account the supervision of the Moscow headquarters] seems unnecessary to us.” The head of the Central Bank, Sergei Ignatiev, then spoke out against it.

This is a global trend, says Interfax-CEA CEO Mikhail Matovnikov: “Strengthened supervision of systemically important banks is prescribed by all the provisions of Basel III, and in this sense we were rather ahead of the curve back in 1998.” The dissolution of OPERU-2 following the 1998 crisis does not indicate the inefficiency of the structure itself, he believes: the reason for the inefficiency is the great influence of “the environment of the seven-banker period, when the Central Bank could not effectively influence systemically important banks.” According to Matovnikov, the Central Bank is already ready to resolve the issue of control over systemically important banks and this will not be work from scratch.

The Central Bank plans to make decisions on supervision of other systemically important financial institutions after the completion of the integration of the Federal Financial Markets Service in 2015.