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Plans on Proportional Regulation and Risk Based Supervision in Non-Banks

17.07.2018 07:31 / The Bank of Russia

The Bank of Russia has drafted and posted for debate the outlines of Proportional Regulation and Risk Based Supervision implementation in non-banks, and details of current regulation approaches.

At present, the majority of non-banks are proportionally regulated to a certain extent. This is a risk based approach, where regulatory demands correlate to the amount of risk taken on by non-banks. The level of risk is determined by two criteria: transaction type (qualitative) and transaction volume (quantitative). These criteria shape the non-bank’s risk profile.

Supervision implements proportional and risk based principles through more intensive and frequent review procedures depending on non-bank category and risk profile. The key transformation we expect in the future is to cut down on reporting for small non-banks. Also, in developing new reporting forms, the non-bank category will be a factor in deciding what info will be reported and how often.

The draft concept is set to reduce the regulatory burden for non-banks and enable preventive risk identification. Proportional Regulation and Risk Based Supervision implementation is in line with current financial market regulation and supervision trends, primarily focused on consumer rights protection, financial market development and stability.

“Proportional Regulation and Risk Based Supervision implementation in non-banks will help us promote the Russian financial market and build consumer trust. It reflects today’s economy and best international practices”, says Vladimir Chistyukhin, Deputy Chairman of the Bank of Russia. “Nevertheless, the variety of services in the financial market precludes us from a completely uniform approach to proportional regulation”.

Financial markets megaregulatorProject Group №1