Foreign banks will be allowed to open branch offices in Russia

The Ministry of Finance has submitted a bill to the State Duma allowing foreign banks to establish branches in Russia. At present, foreign credit institutions can only operate through representative offices or subsidiaries. However, the new bill would allow each credit institution to open one branch.

The branch would need to have a Russian name and no more than half its employees could be foreign citizens. To establish a branch, foreign banks would need to create a website in the Russian domain. They would also need to have held a banking license for at least three years in their home country and have a credit rating meeting the requirements of the Central Bank of Russia.

The bill also states that branches will not be able to perform banking transactions with individuals, except for transfers without account opening and currency buying and selling. It is forbidden to raise funds for deposits, engage in trust management, maintain legal entity accounts, and conduct cash collection.

Branches will also be restricted from engaging in manufacturing, trading, and insurance activities except in specific cases. However, they will be allowed to carry out professional activities in the securities market, excluding securities and cash management related to transactions involving derivative financial instruments.

Since 2013, Russia has prohibited the opening of branches of foreign banks. As a result, they rarely open representative offices in Russia, and instead work through fully-fledged credit organizations. This has its disadvantages, as these representative offices are not legal entities and cannot carry out banking operations. They operate on the basis of regulations approved by the organization that created them, according to the Central Bank. There are currently 24 representative offices in Russia under this structure.