OREANDA-NEWS. May 12, 2010. The Federal Antimonopoly Service (FAS Russia) sent a letter to the State Duma and the Federation Council requesting to exclude the requirements for minimum authorized capital and minimum size of the premises for pawn-brokers from No. 355404-5 draft Law "On Introducing Amendments to Article 2 of the Federal Law "On Pawn-Brokers", reported the press-centre of FAS Russia.

No. 355404-5 draft Law "On Introducing Amendments to Article 2 of the Federal Law "On Pawn-Brokers" (further on referred to as the draft Law) was submitted to the State Duma on 7th April 2010.

According to the explanatory Notes to the draft Law, the established practice of financial organizations - pawn-brokers shows the need for additional requirements for the pawn-brokers and their activities, which would ensure presence of only law-abiding, bona fide, financially sound and socially responsible organizations in this sector.

The provisions of the draft Law set the minimum authorized capital requirement, which, if the draft Law is adopted, must be at least 50 million Rubles.

However, the size of the authorized capital is not an indicator of the company's financial soundness, because it simply shows the owner's funds. Financial soundness is primarily characterized by the ratio of liabilities to the company's own funds. Analysis of the authorized capital without company's liabilities can only lead to a conclusion about the size of the organization.

Over 90% of pawn-brokers have the authorized capital at the level of 10,000 Rubles, and their monthly income does not exceed 400,000 Rubles.

Also the provisions of the draft Law set the requirement to the minimum premises of a pawn-broker, which should be at least 50 square meters. There is no explanation in the Notes to the draft Law as to why such a requirement is necessary.

At the same time, according to the information received by FAS Russia from market participants, 10 square meters should be sufficient premises for exercising economic activities of pawn-brokers.

Therefore, in the FAS Russia's opinion, adopting the draft Law in its current wording would create unreasonable obstacles for market entry of pawn-brokers, and force considerable number of pawn-brokers to terminate their activities. As a consequence, citizens would be unable to obtain short-term loans, which is contrary to the state objectives for developing institutions of micro-financing and support of small business.

In view of the above, FAS Russia sent letters to the State Duma and the Federation Council requesting to exclude the requirements for minimum authorized capital and minimum size of the premises for pawn-brokers from the draft Law.