The information provided will help you to learn about the Russian Federation banking system, and on opening a Russian Federation bank account. There is also details on the laws and regulations that govern the banking system, as well as a list of local and international banks that operate in the Russian Federation.
The foundations of the Russian banking system are provided in Federal Law No. 395-1 On Banks and Banking Activities, dated 2 December 1990 (the Banking Law), and Federal Law No.86-FZ On the Central Bank of the Russian Federation, dated 10 July 2002 (the CBR Law). Issues of bank insolvency are regulated by Federal Law No. 40-FZ On the Restructuring of Credit Organizations, dated 25 February 1999.
The Central Bank of the Russian Federation (the “CBR”) is responsible for the regulation of banking activities. Through its instructions, regulations, and other acts, the CBR establishes rules, standards, and obligatory requirements for banks and non-banking credit organizations throughout the territory of the Russian Federation.
The primary regulatory body governing the banking sector of the Russian Federation is the CBR. The CBR is one of the few institutions under the control of the Russian legislative (rather than the executive) branch. The State Duma must not only approve the nomination of the Chairman of the CBR, but also approve the resignation of the Chairman. However, the CBR Law provides for the establishment of a specific body within the structure of the CBR, the National Banking Council (the “NBC”), comprised of representatives of various executive and legislative bodies. The NBC exercises control over the CBR’s Board of Directors, and participates in establishing the basic principles of Russian banking and financial policy.
The CBR and the Government share authority over monetary policy. The CBR is charged with responsibility for the circulation of monetary funds, and for ensuring the stability of the Russian Ruble. As part of its general oversight role, the CBR establishes state registration and licensing rules, determines minimum capital and reserve requirements, and also approves the appointment of the senior management of all banks (including branches of foreign banks).The CBR maintains regional offices located throughout the Russian Federation. Among the self-regulatory banking organizations, the Association of Russian Banks (“ARB”) is the largest.
Credit Organizations in the Russian Market
Pursuant to the Banking Law, there are two main groups of credit organizations: banks and non-banking credit organizations. A bank is a credit organization, which may engage in all types of banking activities, subject to obtaining the appropriate licenses. Thus, in the Russian Federation, there is no system of specialized banking institutions (e.g. mortgage banks or investment banks). Conversely, a non-banking credit organization is an entity, which is entitled to perform only certain banking operations that are specified by the CBR. Banks and non-banking credit organizations may participate in banking groups (if the controlling company is a credit organization) and banking holdings (if the controlling company is a non-credit organization).
Currently, foreign banks may not establish branch offices in the Russian Federation but may set up Russian banking subsidiaries. Participation of foreign banks in the Russian market is subject to certain restrictions. The most notable restriction is the requirement for non-residents to obtain a CBR approval prior to acquiring a share in a Russian bank, regardless of the amount of the investment. Russian residents, on the other hand, need only apply to the CBR for such approval if they acquire 20% or more of a bank’s shares.
According to the Banking Law, the list of banking operations includes: raising and investing funds; depositing precious metals; maintaining accounts; settling bank accounts of individuals and legal entities; collecting money; exchanging foreign currency; issuing bank guarantees; and transferring money. Banks are also entitled to perform certain non-banking operations, inter alia: providing financial suretyship; trust management; performing operations with precious metals and stones; renting safe boxes; participating in financial leasing operations; and providing consultancy and other informational services. Credit organizations are prohibited from engaging in any industrial, trade, or insurance activities.
A credit organization must be licensed by the CBR in order to conduct “banking activities” as defined in the Banking Law, and must be incorporated in the Russian Federation. License applicants must submit to the CBR a feasibility report, detailed information on senior management and their compliance with qualification requirements, and documents certifying the source of funds contributed to the charter capital of the credit organization. Newly established banks can receive the following licenses:
A registered bank that has held a license for a period of not less than two years is entitled to obtain the following additional licenses:
The CBR may refuse to issue a banking license in the event of: the non-compliance of application documents with Russian legal requirements; the unsatisfactory financial standing of the owners of the credit organization; the inability of the chief executive officer and chief accountant of the credit organization (or their deputies or members of the management board of the credit organization) to meet the qualification requirements; and the unsatisfactory business reputation of members of the board of directors of the credit organization.
Financial Institutions Operating
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