Banking sector

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.