Russia: Finance Ministry Works Out Prudential Regulations for Microfinance Insti...
Moscow, Russia, February, 08 2011 -
The Finance Ministry of Russia has developed prudential regulations of capital adequacy and liquidity for microfinance institutions, and the finance minister’s relevant draft order was posted on the ministry’s web site on Tuesday, RIA Novosti reported.
The legal framework for the operation of these institutions was created by the adoption of the Federal Law “On Microfinance Activity and Microfinance Institutions”, which was signed by Russian President Dmitry Medvedev on July 2, 2010. In line with the law, legal entities that provide credits of up to Rub 1 mln can be classified as microfinance institutions. At present, the Finance Ministry of Russia is completing the development of the regulatory and legal framework for the operation of these institutions.
In accordance with the ministry’s draft order, the prudential regulations are binding for microfinance institutions that attract funds of households and businesses in the form of loans.
The capital adequacy ratio is determined as the ratio between an institution’s equity capital and assets. The minimal capital adequacy ratio is set at 0.5 for microfinance institutions that are registered as non-profit partnerships and attract funds of households and businesses; at 0.3 for institutions registered as a fund, an autonomous non-profit organization, an institution, a business unit or a partnership and that attract funds of households and 0.1 for institutions registered as a fund, an autonomous non-profit organization, an institution, a business unit or a partnership and that attract funds of businesses.
The liquidity ratio is calculated as the ratio between working assets and short-term obligations. The minimal liquidity threshold is proposed to be set at 2 for microfinance institutions that attract funds of households and at 1 for institutions that attract funds of businesses.