Legislative amendments on the protection of competition

The legislative amendments on the protection of competition came into force in July 2016. The appropriate adjustments were added to the Federal Law №264-FZ of 03.07.2016 «On the amendments to the Federal Law «On the protection of competition and individual legislative acts of the Russian Federation» and the Federal Law №316-FZ of 03.07.2016 «On the amendments to the Code of Administrative Offences of the Russian Federation».

One of the most important innovations, decreasing the administrative burden on business activity in accordance with the Federal Law №264-FZ, is the implantation in practical use of immunities in regard to business entities in the part of possible improper use of their dominant position as well as in the part of making private anticompetitive agreements.

In particular, the position of legal entity cannot be recognized as dominant if among its founders or participants are one or more physical persons (including individual entrepreneurs) upon condition that its sales revenue for the last calendar year is not more than 400 mln RUB.

However this rule has the exceptions, according to which the immunities are not available for the following entities:

  • business entities, included in the list, which is identified by Part 1 Article 9 of the Federal Law of 26.07.2006 № 135-FZ «On the protection of competition»;
  • financial organizations;
  • natural monopolies on goods market;
  • business entities, among the founders or participants of which are legal entities;
  • business entities, the share capital of which include the state participation of federal, regional or municipal level.

Besides, the border for transactions on purchase of shares, rights and property, needed for coordination with the Federal Antimonopoly Service of the Russian Federation, was raised to 400 mln RUB.

The unscheduled field checks in regard to small businesses can now only be carried out in coordination with the Prosecution Authorities at the place of business activity in accordance with the procedure established by the relevant order of The Prosecutor General's Office of the Russian Federation. Among exceptions are unscheduled field checks of natural monopolies and the same compliance verifications under cartel agreements.

For reference
According to the Federal Antimonopoly Service, as of 02.10.2015 more than 6 600 of entities were added to the Register of natural monopoly entities and more than 15 300 entities to the Registry of business entities with the market share more than 35%. To get acquainted with the list of these companies - please refer to the section Selections and lists - Lists we recommend of the Information and analytical system Globas-i.

The strongest will survive

What will happen to the Russian banking sector?

The volatility of currency and commodity markets, macroeconomic instability and a number of other factors have a negative impact on the Russian financial sector. Small credit institutions become harder to survive, and, according to the expert forecast, the number of banks in Russia will continue to decline. The consolidation of assets becomes one of the ways to survive in difficult conditions, which, however, has negative consequences for the banking industry.

Crisis recovery. The first half of 2016 was marked by the growth of banks' revenue. After extremely difficult 2015, the sector began to come out of the recession, and for the first half 2016 the profit of Russian banks amounted to 360 billion rubles - 7 times more than the same period of the previous year and for the entire 2015 as a whole. The financial results of credit institutions show a positive trend thanks to the balanced interest-rate policy, which stimulated the growth of net interest income, as well as to the quality improvement of the loan portfolio. The major part of earnings of banks is accounted for the income from credit granting, as well as servicing of credit cards and settlement accounts.

Reduction of the kay rate. Significant efforts to stabilize the banking sector are made by the Bank of Russia headed by Elvira Nabiullina, who was recognized as the best leader among the heads of the central banks in the world in 2015 by the magazine Euromoney. One of the important instruments of influence on the industry has become the regulation of the key rate, which was increased sharply from 10,5% up to 17,0% in December 2014. With the stabilization of the economic situation the rate began gradually to reduce. In 2016, the Bank of Russia has lowered the key rate already twice, both times by 0,5%: the first time in June, the second time in September – up to 10,0%. And although, according to Elvira Nabiullina, the further reduction in the rate in the absence of any significant events in the market should not be expected this year, some experts say that such possibility cannot be absolutely ruled out. According to analysts, if current trends remain, the decrease in the key rate up to 8,0% can be expected by the end of 2017.

Two types of bank assets consolidation. However, fewer and fewer banks are succeeding in the maintaining of market positions and not to become next victim of the revocation of the license. One of the most common ways to save the business in current conditions is the consolidation of bank assets, which can be divided into two types: market transactions of merger and acquisition and resolution. By this there are extremely few market transactions (here it should be remembered the transaction of «Binbank» with «MDM Bank» and sale of the bank «Vozrozhdenie» to the group of «Promsvyazbank»). The most common variant of consolidation became the resolution, which is the main way of transfer of ownership on banks in recent months. For those, having problems with capital, it is a way to get money to survive. However, more and more big players are trying to use the resolution to their advantage: clear own balance by transferring of soft or low-yielding assets into a rehabilitated bank and receive high finance from the government. As a result, a significant part of profit of the banking sector is provided not by the main activity today, but by funds received from the state for remedial transactions. It means that some banks obtain immediate benefit and see it as the purpose of consolidation, and not as the possibility to stabilize the financial situation in the country.

New procedure of resolution. Today's paces of consolidation in the banking sector may remain over the next few years. By this the current procedure of resolution through the Deposit Insurance Agency (DIA) is becoming more expensive for the government. In this regard, in August the Central bank decided to change radically the procedure of resolution. If earlier banks were rehabilitated through DIA, which sought a turnaround manager (or engaged itself in rehabilitation of banks) and provided loans from own fund, the Central Bank will take all into its own hands now. The Bank of Russia will establish a subsidiary - Banking Sector Consolidation Fund, which will acquire a share in the capital of troubled banks and improve its indicators, and only after the rehabilitation such banks will be put up for sale. There will be no more credits for rehabilitation: the fund will provide money on the non-returnable basis. Under the new scheme DIA will be suspended from resolution, which became for it a too heavy burden. The Central Bank considered that the entry into the capital during the resolution will allow to spend on the rehabilitation of bank by 1,6 times less funds than on the rehabilitation through loans of DIA.

Strengthening of the industry by maintaining of competition. According to experts, today there are about 400 banks, which do not contribute to the qualitative growth of the industry and, essentially, have no prospects of survival. Further consolidation of the banking sector is inevitable, and that is why it is important to develop an effective mechanism of resolution, by which those assets will be stored that can be favorable for the economy of the country, and not become an additional burden. At a recent press conference Elvira Nabiullina said that the Central Bank is interested in creating of the procedure of resolution, which is clear, transparent and understandable for market participants. The industry needs precisely this instrument, as well for its strengthening, as for maintaining of competition among its participants.