Banks will be simplified a small share
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Loading... - Brittany Johnson
- 15 Jul 2022
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The Bank of Russia is changing the regulations for approving the acquisition of shares and stakes in financial institutions. In particular, a one percent approval threshold is introduced for intra-group transactions at public auctions. Now even repo or option programs fall under this type of transactions, which significantly burdened market participants with bureaucratic procedures.
The Central Bank will expand the number of cases when transactions for the acquisition of shares and shares of financial organizations do not require approval from the regulator. These changes were published on July 14 and are scheduled to take effect from April 2023. According to the text of the instruction, transactions at public auctions or as a result of a public offering for the purchase of less than 1% of the shares of a financial organization will be exempted from approval if they occur with a group of persons owning more than 10% of its shares and fit into the established gradation of control (the instructions of the Central Bank describe the limits control: for example, over 10%, but not more than 25%, etc.).
However, even in such cases, the Central Bank did not relieve market participants from sending a notification on the results of transactions within 30 days. The changes relate to credit, insurance organizations, management companies (MCs), non-state pension funds and microfinance organizations (MFIs).
The proposed changes, according to EMPP Law Firm partner Ivan Semenkin, make regulation “more comfortable”.
Issues related to the transfer of shares and shares within groups arise regularly if the organization is large and there are, for example, option programs, repo transactions, which technically may fall under the requirements for their prior approval, he notes. And the volume of such transactions is large, the expert says.
Also, the Central Bank expands the package of collected documentation for bank M&A. In situations where one bank wants to acquire more than 10% of the shares (stakes) in another bank, it will need to submit a business plan or changes to the business plan.
As Ivan Semenkin notes, the requirement to have a business plan or its new version is especially relevant in the context of a possible trend towards the consolidation of participants in the banking sector.
“The buyers of the Central Bank are invited to assess the impact of the acquisition transaction on credit institutions, their performance, to develop or refine a strategy and development plans ...,” he explains. “The Bank of Russia expects market participants to receive a predictable, well-developed development path when consolidating assets or acquiring control” .
In other words, it should be a portfolio deal aimed at the development of both credit institutions (both the acquiring and the acquired), and not a speculative deal, for the sake of subsequent resale, notes bank lawyer Nina Semina.
However, the presence of a business plan does not guarantee its implementation, adds Mrs. Semina. As Mr. Semenkin explains, before the rule on the submission of a business plan was in effect during the establishment of a new financial organization, reorganizations and some other formal cases. Read More…
