04 October 2016, 00:59 / Finance

The Central Bank is reforming banking supervision

The current system, even at the cost of extreme efforts, cannot solve the accumulated problems, admitted Elvira Nabiullina Daria Borisyak Anna Eremina Tatyana Voronova Big changes await the supervisory bloc of the Central Bank (on the left - Alexey Simanovsky, on the right - Mikhail Sukhov) / A. Makhonin / Vedomosti

Yesterday the Central Bank announced changes in its leadership. First Deputy Chairman Alexey Simanovsky, who oversaw banking supervision and regulation, will become an adviser to Chairman Elvira Nabiullina from October 17. Deputy Chairman Mikhail Sukhov, who was also responsible for licensing and systemically important banks, will leave the Bank of Russia.

“I am very grateful to Alexey Simanovsky and Mikhail Sukhov for the enormous work done to improve regulation and improve the banking sector, mitigating the impact of external shocks for Russian banks,” says Central Bank Chairman Elvira Nabiullina in the comments on the regulator’s website. The Central Bank has done a lot of work to cleanse the banking sector of unscrupulous and unstable market participants; it has become obvious that in order to solve the accumulated problems, “tuning and intensifying work within the framework of existing supervisory practices is not enough; a deep restructuring of supervision and updating of the entire system are necessary,” the chairman’s message states.

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This will be done by the first deputy chairman Dmitry Tulin - he will replace Simanovsky. Tulin worked in the supervisory unit of the Central Bank in 2004–2006. and returned in January 2015 to oversee monetary policy after a severe crisis in the foreign exchange and money markets (in the early 90s, he oversaw the foreign exchange market). Now Nabiullina herself will do this, and Tulin will head the banking supervision committee and will be responsible for the entire supervisory block, supervising the deputy chairmen of the Central Bank Vasily Pozdyshev and Vladimir Safronov. The format, when the chairman of the Central Bank is personally responsible for monetary policy, is a completely standard decision adopted in many countries around the world, Nabiullina is quoted as saying on the regulator’s website.

The supervisory unit will face not only personnel changes, but also structural ones. The Central Bank plans to centralize supervision: strengthen the supervisory vertical, transfer more powers and significantly increase responsibility for supervisory actions, Nabiullina said in a statement. It follows that the regulator will create three new departments. A separate risk analysis department will be created; it will assess the risks of both banks and other organizations. The newly created Department of Liquidation and Rehabilitation of Financial Institutions will adhere to a unified approach for all sectors of the financial market. The departments responsible for access to the market of credit and non-credit organizations will be merged.

We were looking in the wrong place

Dmitry Tulin, partner at Deloitte & Touche, Analytical Banking Journal, 2009.
“Supervisory work should be carried out in order to early identify financial problems in banks, prevent bank failures and minimize losses, but the Central Bank does not yet know how to do such work, and most importantly, they do not want to. Back in 2002–2003. The leaders of the Central Bank declared absolutely correct goals in the development of banking supervision. The mistake of the leaders of the Central Bank is that they never decided to make fundamental organizational changes, which the supervisory bloc urgently needs.”

The Central Bank did not say who will head the new structures.

Tulin has long wanted to supervise supervision, a person close to the supervisory block of the Central Bank knows. The decision to leave Simanovsky and Sukhov has been brewing for a long time, says Vedomosti’s interlocutor. One federal official said that dissatisfaction with oversight had been bubbling within the Central Bank for quite some time.

Tulin is an extremely decent person and is very well versed in the subject, says Deputy Chairman of the Board of Sberbank Bella Zlatkis. Since he oversaw supervision, a lot has changed, but for a specialist of his level this will not be a problem, she believes. “I have known Dmitry Vladislavovich since 1989 and can describe him as an outstanding professional, a man of exceptional integrity with unshakable moral and ethical principles.

There is not the slightest doubt that he will successfully continue to manage banking supervision and other functions assigned to him,” says Mikhail Alekseev, chairman of the board of Unicredit Bank.

Tulin’s appointment to banking supervision looks strange, the owner of a bank from the top 100 disagrees: “Tulin is a member of the old team, he was involved in supervision under the first deputy chairman of the Central Bank Andrei Kozlov. A lot has changed since then, and there are some concerns about his appointment. After all, Sukhov and Simanovsky were mastodons.” He believes that the appointment of Pozdyshev was more expected by the market.

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Simanovsky worked at the Central Bank for 30 years, 20 of them in banking supervision. Since 1986, he worked at the State Bank of the USSR, in 1992–1996. was deputy head of the Central Bank's main department for the city of Moscow, after which, until 2011, he headed the department at the Central Bank that oversaw supervision. In 2011, he became deputy chairman of the Central Bank, and a year later - first deputy chairman.

Sukhov worked at the Central Bank for 23 years, in supervision for 20 years. From 1996 to 2001 he worked in the department of prudential banking supervision, in 2002–2012. Headed the Department of Licensing of Activities and Financial Recovery of the Bank of Russia. In 2012, he became deputy chairman of the Central Bank.

“The fact that Simanovsky is leaving his post is unexpected news for us,” says the head of a top-20 bank. According to him, nothing foreshadowed such personnel changes. Another banker disagrees with him: rumors about Sukhov’s possible departure have been in the air for a couple of years, and everyone expected Simanovsky’s resignation due to his age.

Apparently, for bankers this means: “Welcome to the new world!”, sneers the GR financier. Tulin, of course, has been known to many for many years and he has experience working in supervision under Kozlov, but it lasted only a year and a half, and this is not enough, Vedomosti’s interlocutor believes.

“The era is over – that’s it,” states the chairman of the board of the state bank. There were many shortcomings in supervision, he says, almost all the banks that fell had obvious problems that were well known to the market. “Why this happened is the question. Perhaps they were unable to properly and timely organize access to information from middle management to its management,” he reflects.

A representative of the Central Bank did not answer additional questions from Vedomosti. Sukhov and Tulin did not respond to calls and messages from Vedomosti. It was not possible to contact Simanovsky.