Hidden Threat: MFIs Extended Ability to Withhold Some Information About Themselves
The Bank of Russia has extended until December 31, 2025 the right of microfinance organizations (MFOs) not to disclose a certain list of information about themselves, the Central Bank said in a statement. It includes, among other things, information on the structure and composition of shareholders, their shares in the authorized capital, information on debtors, creditors, persons who are members of management bodies, as well as information on risks and transactions, the disclosure of which will or may lead to the introduction of restrictive measures by foreign countries. Why this decision was taken and how it will affect the relevant market - in the material of "Izvestia".
Protection from pressure
This is a prolongation of measures that have been in effect for more than two years. Initially, the decisions were taken to protect shareholders, owners, business counterparties from possible sanctions pressure from unfriendly states, which thus lose the ability to impose restrictions not only on the institution itself (in this case, MFI), but also on decision-makers in this organization or cooperating with it, reminded "Izvestia" MBA-professor of business practice in digital finance RANEPA Alexei Voylukov.
- Previously, most of this information was in the public field and was used for economic analysis of the subject, for the assessment of legal, risky conditions. But in this context, the extension of this measure is very reasonable," said the expert. - It will not have a radical impact on the market. Many market participants have already adapted to the possibility of not disclosing certain data. But in general, market shareholders, who would like to analyze the securities of public companies traded on the stock exchange, will suffer most of all.
Now investors do not have full-fledged information and are forced to trust the company's image and data from public sources. The Central Bank still publishes some data, but it is much more difficult to establish additional links and assess all possible risks on their basis.
Similar decisions apply to other financial institutions.
- Earlier, the Central Bank extended for a year the right of banks not to disclose information sensitive to sanctions risk. In our opinion, this hardly changes anything for this market regarding the current situation," Albert Koroev, Head of the Stock Market Expert Department at BKS World of Investments, told Izvestia.
As with other sectors of the Russian financial market, the right not to disclose sensitive information is extended due to the risks of certain large institutions falling under sanctions. The number of such players is measured in units, Ivan Uklein, senior director for bank ratings at Expert RA, told Izvestia.
- Many MFIs affiliated with large banks under sanctions have a similar brand in their name, and there is simply no point in hiding the ownership structure, but there may be concerns about the introduction of personal sanctions. The Bank of Russia has repeatedly urged financial market participants not to abuse the relevant right, but the regulator itself does not separate really sensitive information from the usual cases of reducing the information transparency of some players under the formal pretext of sanctions risks, - the expert emphasized.
Despite the described situation, according to him, there is an unspoken industry standard in the microfinance market to disclose the ownership structure and even the management team. The vast majority of players are not linked to large financial and industrial groups under sanctions and do not fear the imposition of any restrictions.
- The MFI market is still unclear to most institutional lenders, and therefore requires increased disclosure to attract funding. We do not expect any significant impact of the extended easing on the microfinance market," he said.
Competitive advantages
Non-disclosure plays an important role. First, it can prevent the imposition of sanctions on both companies and individuals. Second, it helps protect critical customer data, including protection against information attacks from other states. Finally, third, non-disclosure helps preserve a company's competitive advantage. If certain information becomes available, it can jeopardize organizations' unique position in the marketplace. These are the reasons that obviously underlie this decision, said Denis Astafiev, founder of the investment company SharesPro.
- However, this approach also has a significant negative aspect - lack of transparency," the expert told Izvestia. - This means that it is impossible to get an accurate picture of a company's financial statements: whether everything is in order, whether it complies with the requirements and rules. As a result, there is distrust in such organizations, which, in turn, affects the market as a whole. The market is likely to change, and new services and products will emerge that will be more transparent and understandable for users.
In the main priorities of 2025, as in the past year, remain the issues of the country's security and stabilization of the economy as a whole, said State Duma deputy Boris Gladkikh.
- It is necessary to restructure markets, create new tools to meet the changing realities. Russia has already developed such solutions and tested them over time. For example, the measure for the participants of the NWO is primarily aimed at helping our military," the politician told Izvestia. - We are talking about debt restructuring in the formation of loan debt reserves, MFIs still have the right not to disclose this information.
The decision of the Bank of Russia, in his opinion, will prevent possible problems in the issues of money circulation inside the country, related to the activities of microfinance organizations.
- Today we see Western countries continuing to force bans on the use of domestic payment systems and banking transactions with an increasing number of both accounts and organizations. There is certainly hope for a change in the foreign climate towards us. However, we are not inclined to rely on it. In case of any global changes, Russia will always respond to existing realities, not hypothetical desires," Boris Gladkikh promised.
"Izvestia sent an inquiry to the Central Bank, but at the time of publication no response had been received.
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