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Ministry of Finance Proposes to Simplify Regulation and Expand Opportunities for Branches of Foreign Banks
Federal Law No. 275-FZ “On Amending the Federal Law ‘On Banks and Banking Activities’ and Certain Legislative Acts of the Russian Federation”, which allowed foreign banks to open branches in Russia and conduct certain banking operations through them, came into force on September 1, 2024. However, to date, no foreign bank has taken advantage of this opportunity.

The Ministry of Finance has prepared a draft law that significantly lowers the requirements for foreign banks to open branches in Russia and expands the range of operations available to such branches. The text of the draft law has not yet been published; the information provided is based on media reports. According to the explanatory note to the draft law, “the adoption of the project will contribute to a more active attraction of banks from friendly countries to the Russian financial market to create conditions for the development of an international settlement system under sanctions pressure, as well as to attract foreign investment to finance the economy".

 

Reducing Requirements:

 

  • Lowering the amount of the guarantee deposit. Currently, a foreign bank planning to open a branch must open a minimum guarantee deposit with the Bank of Russia in the amount of at least 1 billion rubles. The draft law proposes to reduce this amount to 90 million rubles.

  • Increasing the proportion of non-resident employees. The maximum permissible proportion of non-resident employees is increased from 50% to 75% of the total number of employees of the branch.

  • Reducing the validity period of the license in the foreign bank’s country of registration. The required validity period of the banking license in the foreign bank’s country of registration is reduced from three to two years.

  • Removing the ban on structural divisions and the involvement of banking agents by the branch.

 

Expanding the List of Permitted Operations:

 

  • Working with individuals and precious metals. The draft proposes to remove the ban on a foreign bank branch opening and maintaining accounts for individuals, and working with precious metals (excluding coins). It also proposes allowing branches of foreign banks to carry out transfers on behalf of clients, including correspondent banks, to their accounts in precious metals.

  • Dealer activity. The project provides for amendments to Federal Law No. 39-FZ “On the Securities Market” of April 22, 1996, allowing foreign banks operating through branches to engage in dealer activity in the Russian Federation.

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