Regulatory requirements to be adjusted to CCC operating model

Changes to financial ratios applicable to credit consumer cooperatives (CCCs) were discussed at a meeting of the Expert Council on Microfinance and Credit Cooperation attached to the Bank of Russia. The regulator's proposed innovations will enable CCCs to opt for a certain regulatory options subject to the cooperative's assumed risk strategy and the level of trust among CCC members.

The legal innovation envisages the use of interrelation between KPK FN1 and FN4 ratios (Russian: КПК ФН1 и ФН4) as financial ratios measuring CCC capital. For all their different nature and different formation specifics, a CCC's reserve fund and unit investment fund combined are representative of CCC capital and can, in the regulator's view, be interconnected.

Credit cooperative market players will capitalise on the proposed regulatory changes to advance various financial models based on best practices. Meanwhile, no extra supervisory requirements will be needed.

The proposed changes come as a result of the discussion of the consultation paper ‘Improving microfinance regulation’, and are based on CCC market entities’ proposals. A draft Bank of Russia ordinance is due shortly, to enable a regulatory impact assessment.

The Expert Council meeting was followed by the first meeting of a taskforce assigned to explore the potential of additional services delivered by CCCs and agricultural consumer credit cooperatives (ACCCs). The taskforce is made up of market participants, CCC/ACCC self-regulatory organisations and the Bank of Russia's Microfinance Market Department. The newly-established taskforce will focus on crafting proposals and discussing potential growth options in CCC/ACCC additional services and analysis of envisioned changes to Russian legislation alongside their potential implications.