The Association of Regional Banks of Russia has sent the State Duma amendments to the Tax Code that would compensate the cost of complying with Basel II. According to experts at InfoWatch, it is unlikely the amendments will be accepted in full, but the country’s banks could gain some benefits.
The Russian daily newspaper Kommersant reports that the Association of Regional Banks is expected to address the Russian parliament with a list of amendments to the Tax Code aimed at mitigating compliance with Basel II. The changes would help Russian banks to change over to a principle of effective banking oversight (Basel II) from January 1, 2007 to January 1, 2011 by reducing taxation of banking profits by the sum set aside to increase authorized capital stock and the cost of deploying software programs for meeting the principles of Basel II. According to specialists, those costs could range from 20 million rubles (approximately $741,000) for small and medium-sized banks to 3 billion rubles (approximately $1.1 million) for large banks. The association’s press release states that otherwise the changeover to Basel II principles could become too expensive not only for the banks but also their clients.
“It is unlikely that those amendments to the Tax Code proposed by the association will be accepted in full. This is because the proposals virtually transfer the costs of complying with Basel II on to the state. The State Duma is unlikely to agree to that. It has to be said that compliance with Basel II, albeit necessary, is relatively expensive. Therefore, the parliamentarians may well mitigate the legal burden by providing tax relief to ease things somewhat for banks,” says Denis Zenkin, marketing director at InfoWatch.
Source: Kommersant
