Russia to ban foreign banks from opening branches

Russia’s State Duma is considering a bill banning foreign banks from opening their branches in Russia, only allowing bank subsidiaries to operate in the country.

The reason of for the new bill is that branches of foreign banks, unlike subsidiaries, are not subject to Russian jurisdiction. Hence they are not fully controlled by Russian regulators.They don’t have to make deductions to Russia’s reserve funds or submit statements based on international or Russian accounting standards to the Central Bank.Russian authorities think that such “privileges” could harm the competitiveness of Russian banks.The current legislation simply limits foreign capital’s participation in the Russian banking sector.The new legislation wants to see the word “branch” excluded from the Russian banking system and the phrase “foreign bank branches” is banned from articles concerning registration of lenders with foreign capital. The government has prepared the bill in line with Russia's entry into the World Trade Organization.