Banks of the Russian Federation did not support the idea of the Central Bank to expand the scope of disclosed information

Banks of the Russian Federation did not support the idea of the Central Bank to expand the scope of disclosed information

Moscow. June 1. Russian banks do not support the idea of the Central Bank to broaden the composition of the publicly disclosed information in order to raise the awareness of clients, investors and counterparties, according to a survey conducted by the Association “Russia”.

Of the Central Bank in early April, proposed to increase disclose to clients information about the situation within the banks.

“Because often, even for creditors of banks, for large banks the situation in the Bank is opaque. And society demands from credit institutions for greater transparency. The Bank of Russia supports this position, and we are ready to develop approaches to the disclosure of risk information, which can be useful for creditors, for the users of banking services. We develop standards for the disclosure of such information on the information resources of the Bank of Russia. And ready with the banking community, of course, to discuss this whole format”, – said the head of the Central Bank Elvira Nabiullina in the beginning of April at the Congress of the ARB.

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In the survey of the Association was attended by 57 of the credit institutions, of which 15 are in the top 50 banks in terms of assets.

“All credit organizations of the respondents negatively assessed the possibility of implementing this proposal,” – said in a letter to the Association to the acting Director of the Department of banking regulation CB Alexander Zhdanov.

According to the Central Bank, banks could disclose information about the amounts of the most risky parts of the loan portfolio (e.g., loans to borrowers with signs of a lack of actual activity; investments in securities that are held in depositories that do not meet the criteria of the Central Bank, their foreign activities (loans to non-residents and to correspondent accounts of foreign banks), as well as on the volume of liquid assets (e.g., assets used and available to provide as collateral, the Central Bank).

Banks, in turn, believe that the implementation of this idea will require changes in the Civil code or the law on banks and banking activities, as the client’s consent to disclosure of information about him does not exclude the risk of violating Bank secrecy. The disclosure of this data also affects the norms of the law “On personal data”.

According to them, the previous laws allow already now to increase the transparency of asset quality, in particular, due to the mandatory transmission of information to the credit Bureau and the audit of IFRS financial statements, which revealed information about the credit quality of the largest credit claims in the portfolio.

Banks interviewed consider it inappropriate disclosure of new information, even in the case of the removal of legislative contradictions, the letter said.

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“Major risks are assessed collectively in a group of related borrowers, the list of largest borrowers quite volatile, so the cost of adjustment of workflow and internal procedures will be visible”, – stated in the letter.

In addition, some banks may refuse to disclose, not to disclose negative information about customers. At the same time, when deciding on the granting of consent/refusal for disclosure, clients can consent only in the main service of the credit organization, providing the denial of the other creditors. Thus, credit institutions may be not comparable conditions, the authors of the letter.

“It is also worth noting that in the case of non-disclosure by credit institutions of the above information from their clients and contractors can raise doubts as to the reasons for non-disclosure of this information, which may unreasonably adversely affect the reputation of the credit organization”, – said in the letter.

In the disclosure of information about financial status of clients may be a reflection of different banks assess the financial situation of the same customers, given the existence of different approaches to credit rating organizations in the legal and physical persons, including the potential for operating errors and biased approaches.

Disclosure of information on the availability and quality of provision, along with information about the assessment of the financial situation may have a negative impact on the market situation in General. In particular, it may be a fact of overstatement/understatement in the fair value of the mortgaged property according to various estimates, that will lead to the inability to determine the real value of the mortgaged property. Moreover, information about the quality of collateral and financial position of customers can be used by market participants to manipulate information about the situation in the banks and their financial strength in the best order, the letter of the Association “Russia”.