Olga Pleshanova's article in the Metodicheskiy Journal

Olga Pleshanova, Head of Analytical Department at Infralex, shared an engaging story about "how one little but stubborn bank (the Russkiy Bank Delovogo Sotrudnichestva (RBDS)) with its extravagance and uniqueness pestered the Central Bank with complaints and created a very important legal precedent, as well as a method for challenging the regulator's actions."     

At the dawn of the deposit insurance system's formation in 2005 (to join which banks had to undergo Central Bank purgatory), over 160 banks received negative conclusion, leaving them outside the system. However, several banks, including RBDS, appealed to the court (the law provided banks with two attempts to appeal).

RBDS won against the regulator twice:

1. the first negative opinion against the bank was declared invalid (however, the regulator refused to enforce the court's decision, refusing to acknowledge the act as obligatory);
2. the Central Bank's second negative opinion, issued in response to the RBDS's repeated petition, was also invalidated by arbitration courts.

Then the Central Bank filed a complaint to the Supreme Arbitration Court of the Russian Federation, and the case was transferred to the Presidium.

"...The judges were bombarded with unfamiliar financial terms, formulas, account statements, and hundreds of pages of Central Bank documents filled with figures and calculations. The courts tried to rely on formal criteria they understood (for example, compliance with procedural requirements), while the Central Bank insisted that the court should not delve into financial analysis at all—the assessment of banks' condition should be entirely left to the professional judgment of the regulator," Olga described the nature of legal proceedings related to the assessment of banks' financial condition during that period.

Ultimately, the Presidium of the Supreme Arbitration Court of the Russian Federation agreed: the court rulings in favor of the RBDS were overturned, the Central Bank's decision was upheld, and the court's decision became a precedent resolving the dispute over the jurisdiction of the Central Bank and the judiciary. The Presidium of the Supreme Arbitration Court of the Russian Federation recognized the supervisory authority's right to make decisions based on its own standards, methods, and professional judgment.

For more details on the humorous and revealing details of the trial, as well as the RBDS's unique approach to protecting its rights, read the latest issue of the Methodological Journal.