Organization of banking supervision
A system of banking supervision formed in the Republic of Belarus generally meets the world standards. It includes the registration and licensing of banks and non-bank financial institutions, performance of off-site supervision of banks and JSC “Development Bank of the Republic of Belarus” (Development Bank) on the basis of reporting, on-site supervision in the form of inspections, application of relevant supervisory response measures to banks and the Development Bank in case of violation of banking legislation thereby and deterioration of their financial state, reorganization and liquidation of banks, systemic analysis of the banking sector risks, regulation and control in the field of money laundering, terrorism financing and the financing of proliferation of weapons of mass destruction, as well as implementation of foreign exchange control.
The National Bank is the banking supervisory authority.
In accordance with the Banking Code of the Republic of Belarus, the main objectives of the banking supervision are the maintenance of the banking system sustainability and protection of the interests of depositors and other creditors.
The strategic task of banking supervision is to prevent systemic banking crises. The main tasks also include:
- ensuring appropriate control over admission of bona fide, financially stable and reputable investors to the banking system, as well as control over professionalism and reputation of senior management of banks;
- formation of efficient systems of corporate governance, risk management and internal control by banks and the Development Bank;
- establishment of prudential restrictions with regard to risks of banking activities, capital adequacy requirements and reserves, consistent with international practice and considering the economic situation in the country;
- carrying out efficient current supervision of the activities of banks, the Development Bank by means of analyzing the reporting submitted and carrying out inspections;
- timely application of corrective measures ensuring the maintenance (restoration) of solvency and liquidity of banks and the Development Bank; timely removal of banks from the market, which position is not amenable to correction, minimizing the consequences of banks’ failures for the banking system and creditors;
- formation and improvement of methodological support in the sphere of preventing money laundering, terrorism financing and financing the proliferation of weapons of mass destruction;
- organization and control over the implementation of the requirements of legislative acts in the field of preventing money laundering, terrorism financing and financing the proliferation of weapons of mass destruction by banks, the Development Bank, leasing and microfinance organizations, forex companies, and the National Forex Center; and
- monitoring the implementation of the requirements of foreign exchange legislation by banks and the Development Bank in the course of inspection activities.
The Banking Code establishes the rights and powers of the National Bank in the field of:
- prudential regulation of the activities of banks and supervision thereover, supervision of the activities of banking groups and banking holdings on a consolidated basis;
- determining the procedure for the implementation of measures to prevent money laundering, terrorism financing and financing the proliferation of weapons of mass destruction by banks, the Development Bank, leasing and microfinance organizations, forex companies, and the National Forex Center; and
- implementation of foreign exchange control in accordance with the legislation of the Republic of Belarus.
The National Bank carries out a constant monitoring of banks’ compliance with banking legislation, establishes the scope of and procedures for publishing (submitting) information used to assess the level of banks’ reliability, as well as qualification requirements and (or) requirements of business reputation for candidates for managerial positions at banks, as well in banks’ management bodies.
Legislation requirements for banks and non-bank financial institutions in the field of banking supervision are applied to the Development Bank taking into account the specific characteristics established by the National Bank.
Information received in line with banking supervision is not subject to disclosure, except for cases stipulated by legislative acts of the Republic of Belarus.
The National Bank analyzes the activities of banks in order to identify situations that threaten the interests of depositors and other creditors. In case of revealing such situations, the National Bank has the right to apply the measures of influence (supervisory response) provided for by the Banking Code.
The main regulatory documents regulating the implementation of banking supervision, including the prevention of money laundering, terrorism financing and financing of the proliferation of weapons of mass destruction, are posted on the official website of the National Bank in the global computer network Internet:
With a view to improving the banking sector stability, a system of prudential requirements has been formed based on the world experience and recommendations of the Basel Committee on Banking Supervision, which includes the following basic requirements:
- capital adequacy to cover the main risks of banking activities (credit, market, and operational), taking into account conservation, countercyclical buffers and buffer of system significance;
- management of the bank’s liquidity and liquidity risk limitation, including the availability of a sufficient stock of highly liquid unencumbered assets to meet short-term obligations, as well as matching the available amount of stable funding to the structure of assets and liabilities;
- limiting the concentration of risks, including limiting the risk per one debtor, a group of interrelated debtors, per one debtor (insider) related to the bank and persons related thereto, as well as limiting the total amount of risks to all insiders and the total amount of major risks;
- creation of special reserves to cover possible losses on assets and transactions not reflected in the balance sheet;
- availability of corporate governance, risk management and internal control systems; and
- disclosure by banks of information for market participants.
For the purpose of increasing the efficiency of banks, the National Bank developed requirements and recommendations for the organization of corporate governance, risk management and internal control in banks, the Development Bank, banking groups and banking holdings.
In order to create an efficient national system on preventing money laundering, terrorism financing and financing of the proliferation of weapons of mass destruction, requirements have been developed for internal control rules of banks, the Development Bank, leasing and microfinance organizations, forex companies, the National Forex Center, as well as recommendations on managing risks in this sphere.
The consistency with the international standards developed by the Basel Committee on Banking Supervision and other international financial institutions, the gradual implementation and application of principles and approaches to banking regulation and risk-based supervision tested through the world practice serve as guidelines towards improving the principles and instruments of banking supervision.
In addition to the banks’ supervision on an individual and consolidated basis, the National Bank monitors the risks of the banking sector as a whole in the framework of system analysis, assesses the impact of economic and monetary factors on its stability in order to promote the reliable and safe functioning of the banking sector, ensure macroeconomic stability, and reduce the likelihood of systemic banking crises.
The functions of the banking supervisory authority in the National Bank are entrusted to the Banking Supervision Directorate, Inspection Directorate and the relevant units of the National Bank’s Region Main Departments.
BANKING SUPERVISION DIRECTORATE
- Registration and Licensing Division
- Systemic Banks Off-site Supervision Department
- Non-systemic Banks Off-site Supervision Department
- Prudential Supervision Methodology Department
- Banking Sector Risk Analysis Department
- Financial Monitoring Methodology Department
- Credit Risk and Assets Quality Assessment Department
- Risk Management System Assessment Department
- Corporate Management and Internal Control Systems Assessment Department
Decisions on certain issues of banking supervision are taken jointly by the relevant bodies of the National Bank.
The Board of the National Bank approves regulatory legal acts in the field of banking supervision, takes decisions on state registration, reorganization and liquidation of banks, issue of special permits (licenses) for banking activities, regulation of the banks’ activities for the purpose of safe and liquid implementation thereof, as well as determines the procedures for forming banks’ reserves and the procedure for applying measures of influence to banks (supervisory response measures).
The Supervisory Committee of the National Bank is a collegial body that ensures the preparation of agreed positions for making management decisions on the issues related to banking supervision and conducted banking operations, foreign exchange regulation and foreign exchange control, preventing money laundering, terrorism financing and financing of the proliferation of weapons of mass destruction and development of measures to protect the interests of depositors, bank creditors, the Development Bank other participants in the financial market. The Chairman of this committee is the Deputy Chairman of the Board of the National Bank responsible for the activities of the Banking Supervision Directorate.
The decisions of the Supervisory Committee of the National Bank are mandatory for execution by the National Bank’s structural units. The tasks of the Supervisory Committee of the National Bank in the field of banking supervision are:
- consideration of the results of inspections of banks, the Development Bank;
- consideration of the results of the off-site analysis of banks’ activities, including the results of operational monitoring of banks’ compliance with secure functioning requirements, other prudential requirements and indicative parameters established by the National Bank and Monetary Policy Guidelines of the Republic of Belarus;
- consideration of the results of analyzing the prospective methodological approaches to the assessment of the banks’ capital and risks, proposals for their implementation as prudential requirements; and
- identification of activities aimed at improving banking supervision.
The National Bank is also a member of the Group of Banking Supervisors from Central and Eastern Europe (BSCEE), which includes banking supervisory authorities from 24 countries. The main objectives of the BSCEE are to maintain close cooperation between the supervisory authorities of the countries of Central and Eastern Europe; assistance in conducting research, implementing educational programs and carrying out other activities related to the activities of the members of the Group; providing an opportunity to exchange experience in the field of methodology and practice of banking supervision and other relevant information.
In accordance with the recommendations of the Basel Committee on Banking Supervision, the National Bank is actively working to conclude bilateral agreements with the banking supervisory authorities of other countries. These agreements are aimed at exchanging information in the sphere of establishing and licensing cross-border institutions, supervising their day-to-day activities, conducting inspections, making decisions on issuing permission to purchase shares of a credit institution in order to effectively perform functions by the banking supervisory authorities and banking systems’ sustainable functioning. As of January 1, 2018, the National Bank concluded 17 bilateral agreements in the field of cross-border banking supervision.