Home / Doing business in Russia 2020 / Banking sector / Licensing and operations
  1. Introduction
    1. Political and administrative structure
    2. Legal environment
  2. Common forms of business structures for foreign investors
    1. Main types of structure
    2. Registration, liquidation and reorganisation of business structures
    3. Shareholders’ and participants’ agreements
    4. Strategic industries
  3. Anti-monopoly issues
    1. General legal and regulatory framework
    2. Scope of application of the Competition Law
    3. Anti-competitive practices and restriction of competition
    4. Liability
  4. Tax system
    1. General approach
    2. Corporate taxation
    3. Incentives
    4. Special tax regimes
    5. Taxation of individuals
    6. Double taxation treaties
  5. Customs regulations
    1. General approach
    2. Trade between EEU and non-EEU countries
    3. Mutual trade between the EEU members
  6. Currency control
    1. Foreign currency transactions
    2. Consequences of breach/Penalties
  7. Lending in Russia
    1. Lending documents and governing law
    2. Jurisdiction
    3. International finance transactions and repatriation requirements
    4. Security interests
    5. Recognition of security trusts
    6. Syndicated loans
    7. Enforcement
    8. Suretyships and guarantees
    9. Bankruptcy considerations
    10. Other lending related issues
  8. Employment and migration
    1. Formalising the employment relationship
    2. Managing employment relationships
    3. Terminating an employment agreement
    4. Specifics of employing foreign nationals
  9. Personal data protection
    1. General approach
    2. Scope of the Data Protection Law
    3. Liability
    4. Right to be forgotten
  10. Intellectual property
    1. General approach
    2. Contractual aspects of intellectual property rights
    3. Rights over the results of intellectual activity
    4. Company names, trade names, trademarks and appellations of origin
    5. Intellectual property rights infringements
    6. IP Court
  11. Advertising issues
    1. General approach
    2. Scope of application of the Advertising Law
    3. Violations of the Advertising Law
    4. Liability
  12. Anti-corruption and compliance
    1. General approach
    2. Legal framework
    3. Compliance requirements for companies
    4. Concept of corruption in Russian law
    5. Possible targets of bribery
    6. Liability and penalties for corruption
    7. Example of sector-specific anti-corruption measures
  13. Real estate and construction
    1. Rights to real estate
    2. Real estate transactions
    3. Resolution of real estate disputes
    4. Planning and construction issues
  14. Corporate bankruptcy
    1. Insolvency criteria
    2. Stages of bankruptcy proceedings
  15. Import substitution and production localisation in Russia
    1. Measures affecting goods importation and current import substitution legislation
    2. Localisation incentives
    3. Sector-specific impact of import restrictions and localisation requirements
  16. Banking sector
    1. Legislative and regulatory framework
    2. Licensing and operations
    3. Deposit insurance
    4. The anti-money laundering law
    5. Bank secrecy
    6. FATCA and CRS
  17. Environment, energy efficiency and renewables
    1. Environment
    2. Energy efficiency
    3. Renewables
  18. Infrastructure and public private partnerships
    1. General approach
    2. Key PPP legislation
    3. Russian PPP environment
    4. Financing
    5. Legal issues
    6. Prospects for infrastructure projects
  19. Oil & gas
    1. Legislative framework
    2. Ownership and licensing
    3. Restrictions on foreign investors
    4. Licences
    5. PSAs

Banking sector

The Russian banking industry is still characterised by a large number of credit institutions (836 as of 1 January 2020) and by a high level of concentration of capital.

In 2018-2019 the Central Bank of Russia (the “CBR”) continued its policy of reducing the number of credit institutions, aiming for their consolidation and the closer supervision of their activities in the current economic climate. Consequently, a noticeable number of banking licences were revoked in the last two years.

As of 1 January 2020, 60.3% of the banking sector’s total assets were held by the top five Russian banks1. State-owned banks2 continue to play a significant role in the stabilisation and development of the Russian banking sector.


[1] As of 1 January 2020, the top five Russian banks in terms of net assets are Sberbank (RUB 28.9bn, i.e. EUR 412.9m); VTB (RUB 14.3bn, i.e. EUR 204.3m); Gazprombank (RUB 6.5bn, i.e. EUR 92.9m); National Clearing Centre Bank (RUB 4bn, i.e. EUR 57.2m); and Alfa-Bank (RUB 3.8bn, i.e. EUR 54.3m); www.banki.ru/banks/ratings/ (all conversions are based on a notional rate of RUB 70 = EUR 1, as used for convenience throughout this guide).

[2] Such as Sberbank, VTB, Gazprombank, etc.

Key contacts

Contact
Baranov Konstantin
Konstantin Baranov
Partner
Head of Banking & Finance
Tchoubykina Elena
Elena Tchoubykina
Counsel
Banking & Finance

Licensing and operations

Licensing

A credit institution must be licensed by the CBR in order to conduct “banking activities”, as defined in the Banking Law. Credit institutions may be incorporated either as joint-stock or limited liability companies.

Since 1 June 2017, the Banking Law provides for the two types of banking licences:

  • universal banking licences; and
  • basic banking licences. The basic banking licence restricts the operations that the bank can carry out in relation to foreign clients and counterparties. Its holder is also prohibited from opening correspondent accounts with foreign banks (except for correspondent accounts required to participate in a foreign payment system) and can invest only in a limited range of securities. On the other hand, a bank with a basic licence enjoys lower capital1 and other regulatory requirements and limited disclosure obligations.

If a bank intends to carry out particular banking operations (e.g. operations with a foreign currency, with funds of individual clients or with precious metals), they must be expressly indicated in the universal banking licence or the basic banking licence or be permitted in a specific licence to carry out operations with precious metals issued by the CBR to the bank.

The CBR may deny the issuance of a banking licence in the event of: (i) the non-compliance of application documents with Russian law requirements; (ii) the unsatisfactory financial standing of the founders and their controlling persons; (iii) the non-compliance with the qualification requirements of the managers; or (iv) a member of the supervisory board (board of directors), a founder with more than 10% of shares (participatory interests) or its controlling persons having an unsatisfactory business reputation as defined by the law. The CBR may revoke a banking licence, for example, in cases of capital inadequacy, breach of banking and other Russian law requirements (including breach of anti-money laundering regulations), for carrying out banking operations that are not authorised by the relevant banking licence, or the insolvency of a bank.

Apart from banking licences, there are also special licences issued to non-banking credit institutions enabling them to conduct certain types of banking operations with respect to settlement and payment transactions, deposit and investment of funds of legal entities and clearing operations.

Acquisitions

Acquisitions in the banking sector are subject to specific banking and anti-monopoly rules.

Banking rules

According to the Banking Law, the CBR must:

  • give its prior consent to any acquisition relating to (i) more than 10%, more than 25%, more than 50%, more than 75% or 100% of the voting shares; or (ii) more than 10%, more than 1/3, more than 50%, more than 2/3 or 100% of participatory interests, in a credit institution;
  • give its prior consent when a company, group of companies or individual acquires direct or indirect control of a shareholder(s) of a credit institution holding more than 10% of the voting shares or participation interests in the respective credit institution; and
  • be notified of an acquisition of more than 1% (but less than 10%) of the voting shares or participatory interests in a credit institution.
Anti-monopoly rules

Prior approval by the Russian Federal Anti-monopoly Service is required if the proposed acquisition relates to:

  • more than 25%, more than 50% or more than 75% of the voting shares, or more than 1/3, more than 50% or more than 2/3 of participatory interests, in a credit institution, or more than 10% of the assets of a credit institution; and
  • the target is a credit institution whose assets exceed RUB 33bn (EUR 471.9m).

Operations

Banks may carry out a wide range of banking operations and provide various services. Non-banking credit institutions may only conduct a limited number of banking operations, such as maintaining accounts and processing payments on behalf of various entities.

The Banking Law provides that the following services qualify as “banking operations” and are subject to obtaining an appropriate CBR licence:

  • taking deposits from individuals and legal entities (both demand and fixed-term deposits);
  • investing the deposited funds as a principal, and opening and maintaining bank accounts for individuals and legal entities; 
  • performing settlements in accordance with the instructions of individuals and legal entities, including correspondent banks, from/to their bank accounts; 
  • providing cash, cheque, promissory note, payment document handling services and over-the-counter services to individuals and legal entities; 
  • selling and purchasing foreign currency (including banknotes and coins); 
  • taking deposits in precious metals and investing them, opening precious metal accounts and conducting operations on precious metal accounts; and 
  • processing payments of funds (including e-money transfers) in accordance with the instructions of individuals without opening bank accounts (excluding payments by post).

In addition to banking operations, credit institutions are permitted to: (i) give suretyships for the obligations of third parties contemplating payment in cash; (ii) accept assignments of rights to demand payment in monetary form; (iii) perform trust management of monetary funds and other assets for individuals and legal entities; (iv) engage in operations with precious metals and coins made of precious metals2; (v) lease out special premises and safe deposit boxes to individuals and legal entities for document and valuables storage; (vi) effect leasing operations; (vii) engage in factoring operations; (viii) provide consulting and information services; and (ix) issue bank guarantees. A credit institution may enter into any other transaction in compliance with the relevant Russian legislation. 

Under the Banking Law, a credit institution cannot engage in manufacturing, commodities trading (excluding precious metals3) or insurance activities. However, these restrictions do not extend to any cash-settled commodity derivative transactions.


[1] Since 1 June 2018 the capital of a bank with a universal banking licence should be not less than RUB 1bn (EUR 14.3m), while that of a bank with a basic banking licence should be not less than RUB 300m (EUR 4.2m) (subject to some exceptions). Back ↑

[2] In accordance with Federal Law No. 41-FZ “On Precious Stones and Precious Metals” dated 26 March 1998 and related legislation. Back ↑

[3] On the basis of a licence to carry out operations with precious metals. Back ↑

Key contacts

Baranov Konstantin
Konstantin Baranov
Partner
Head of Banking & Finance
Tchoubykina Elena
Elena Tchoubykina
Counsel
Banking & Finance