Banning foreign banks from opening in Russia

Foreign banks banned from opening branches in Russia

CONTEXT

• Russians face fines for income operations with foreign banks
• Law on banning foreign banks branches passes first reading
• Case on foreign banks operating without offices in Russia to be reconsidered

© RIA Novosti, Ruslan Krivobok

MOSCOW, March 15 - RAPSI. President Vladimir Putin has signed a government-sponsored law banning foreign banks from opening branches in Russia, PRIME reported on Friday, citing a post on the government legal information website.

The bill was adopted by the State Duma on February 22 and approved by the Federation Council on March 6.

The bill amends some of the existing Russian banking laws as part of a strategy to develop the Russian banking sector until 2015 and consolidates the agreements reached by Russian negotiators during consultations on Russia's accession to the World Trade Organization (WTO).

The law excludes branches from the definition of the banking system in Russia. It also removes the phrase "branches of foreign banks" from articles on the state registration of credit institutions with foreign investments and on additional requirements for their establishment and activity.

Foreign capital in the Russian banking sector is held in subsidiaries of foreign banks, registered in accordance with Russian legislation.

The explanatory note to the document states that branches operate in a different way from subsidiaries of foreign banks, since branches are not subject to Russian jurisdiction.

Therefore, they are not subject to full supervision by regulators; they are not obliged to allot money to obligatory reserve funds, or to report to the Bank of Russia via both the Russian and international accounting systems, nor do they need to submit monthly reports to the Bank of Russia.

The bill's sponsors say that these privileges may reduce the competitiveness of Russian banks.