The Central Bank of the Russian Federation began to fight corruption of officials through non-issuance of loans

Experts argued about the effectiveness of this measure, since wealthy civil servants are desirable clients for banks

The Central Bank warned credit institutions that when providing loans to officials or related persons on the security of real estate, the legality of the purchase of which they are not able to prove with their existing income, the property pledged by the bank may be turned into state income. This is stated in a letter signed by the Chairman of the Central Bank of the Russian Federation, Elvira Nabiullina. Exporters have differing opinions on how effective the proposed measure is in the fight against corrupt officials.

The purpose of the recommendations described in the regulator’s letter is to minimize the likely losses of banks when lending to wealthy government employees. This, according to the Central Bank document, can only be done by obtaining more information about wealthy borrowers. In particular, it is imperative to establish whether a wealthy client of a credit institution is an official. If the answer is yes, the regulator invites its wards to seek confirmation of the acquisition of the pledged property with legal income. In addition, Russian banks are recommended to more carefully assess the risks that may arise due to the connection between an official and a borrower; in other words, relatives of officials should also be checked.

However, how effective the proposed strategy will be is a moot point, since wealthy civil servants are welcome clients of any credit institution. In addition, citizens who have significant capital in their accounts, like their relatives, rarely require loans. “You need to understand that “conditional corrupt officials” who have large sums in their accounts, as a rule, do not need loans, unless we are talking about buying a business or commercial space, but in this case other aspects of verification arise and banks look for additional details of such transactions,” emphasizes lawyer Vadim Tkachenko. It is impossible to say that the state is “tightening the screws”, because law-abiding citizens will not have any problems and the new norm will not matter to them. But for those who have capital that was legalized illegally, there is cause for concern. This letter is certainly a consequence of the state’s desire to whiten revenues and continue the fight against corruption. In 2023, many criminal cases related to this type of crime were filed. During the proceedings, a large amount of property was discovered that was acquired dishonestly. In this regard, the Bank of Russia has followed the path of states that successfully fight corruption: the regulator is establishing protective measures and introducing a new requirement for successfully obtaining a loan under suspicious transactions. Before this, there was also a check, not only of the credit history, but also confirmation of the legality of income was also necessary. Now there is a tightening and a new need is added to these requirements: to check the property that is pledged, the lawyer emphasized.

The banking community indicated that this is not about introducing a new norm, but about a reminder of existing practices, which will only complicate the life of credit organizations. “The bank issued a loan to the borrower secured by real estate, then it turned out that the borrower was a corrupt official or his close relative,” says Maxim Osadchiy, head of the analytical department of BKF bank. — A corrupt official, let’s say, in places not so remote. His property was seized and the loan was not serviced. And here the bank is punished a second time – the mortgaged real estate is confiscated in favor of the state! Banking activity is like a minefield: God forbid you “step” on a corrupt official. To avoid ruin, bankers have to tighten customer verification procedures to identify corrupt officials and their relatives. In this case, public officials – people who occupy high positions in the public service, and their relatives – are subject to especially thorough checks. However, the problem is that corrupt officials are one of the most attractive groups of clients from the point of view of banking services.”

According to arbitration manager Alexander Tkachenko, this restriction in itself will not affect the corruption of high-ranking officials, but it may affect the number of loans issued to them, and red tape in banks will increase. If we take into account that officials only have the “green light” to obtain loans, then such a letter is justified. The bank’s analysis of the borrower’s actions regarding the legality of the acquisition of certain objects is a selective norm that does not have mass application, and therefore such an action by Elvira Nabiullina is the usual protection of banks from financial losses. The effectiveness of this measure is controversial, but apparently, the Central Bank, knowing the problem, does not understand how to conceptually deal with it, because while loans are issued and approved by people, not robots, the influence of the “human factor” remains, the expert noted.