Multi-level banking system

Thu, 01/06/2017

Banking licenses in Russia will be divided into “universal” and “basic”. By Daria Fadeeva, Relationship Manager, GSS Russia


As of 1 June, amendments to the Federal Law "On Banks and Banking Activities" and the Federal Law "On the Central Bank of the Russian Federation (CBR)", will become effective, introducing a multi-level banking system. A respective law has been signed by Russian President Vladimir Putin.

According to the new legislation, banking licenses will now be divided into “universal” and “basic” depending on the capital size and the permissible types of banking operations and activities. 

In the future, all credit institutions established as banks will be recognised as banks with a universal license.  At the same time, banks whose stock capital on 1 January 2018 appears to be less than RUB 1 billion, will have to change their banking license to the basic one, unless they choose to increase their capital.

Currently all banks operate under general banking licenses granted by the CBR and will automatically become banks with universal banking licenses when the law comes into force. As of 1 January 2018, the capital requirements for banks bearing a universal license will be set at a minimum of RUB 1 billion, while for banks with a basic license it will be a minimum of RUB 300 million and a maximum of RUB 3 billion.

The law establishes a list of the banking operations allowed under the basic license, which will include raising funds from individuals and legal entities in deposits and placement of these funds to individuals, Russian or foreign citizens, and certain types of legal entities under the defined criteria. However, banks with a basic license will be limited in the number of banking operations that they will be allowed to carry out. In particular, banks with a basic license will not be able to place borrowed funds, issue bank guarantees or open accounts with foreign banks. At the same time, they will be subject to the simplified regulatory reporting requirements.

Banks originally granted with the basic license that have reached a capital of RUB 1 billion will have the opportunity to apply for a universal license covering the full list of banking operations and becoming subject to additional requirements.

The law is expected to simplify the regulatory function of the Bank of Russia, as it will become easier to reveal unreliable banks at an earlier stage. It is also expected to cancel the concept of “systemically important” banks, as there will no longer be such a category.

Simplification of securities issue procedure

The Council for the Codification and Improvement of the Civil Legislation has approved the main part of a new bill developed by the Ministry of Finance which aims to simplify the securities issue procedure. The bill amends the laws "On the Securities Market", "On Joint Stock Companies", "On State Registration of Legal Entities and Individual Entrepreneurs" and other legislative acts governing the issuance process.

According to the bill, the concept of a security certificate will be excluded from the existing laws (the ownership of issued securities will instead be described in the decision on issuance). The duplication of the terms of placement in the decision on issuance and securities prospectus is eliminated as well. Besides, the issuer will be relieved of the obligation to provide notification on the results of the issue. In addition, the bill provides the right to pass all documents for issue registration in electronic form. A simplified procedure for registration is supposed to be applied to the placement of bonds of any type that are not convertible into shares.

The bill will entrust the registrars to register share issues at the time of foundation of joint stock companies. The bill will also assign the function of a registering body for corporate bonds to the CSD (NSD) and for stock exchange bonds to the stock exchange (MOEX).

The advent of the bill is the result of a state campaign aimed at stimulating the development of the stock market. Its main goals are to eliminate duplicate requirements, remove administrative barriers and to simplify the issuance procedure.

Contact Details
Daria Fadeeva
Relationship Manager
GSS Russia