Russian President Vladimir Putin recently signed a law adopted by the Russian Duma that bans foreign banks from opening branches in the country.
The bill, which is aimed at encouraging the development of the domestic banking sector by 2015, amends several existing banking laws and creates uniformity among agreements reached through negotiations with the World Trade Organization, MENAFN.com reports.
Essentially, the law excludes “branches of foreign banks” from certain provisions pertaining to the state registration of credit institutions with foreign investment, as well as from additional requirements for their creation and activities.
Under Russian law, foreign capital in the Russian banking sector is held by subsidiaries of foreign financial institutions, according to MENAFN.com.
The document said that branches, which are not subject to Russian rules, operate differently than subsidiaries, so they are not subject to oversight by Russian regulators, are not required to put money into reserves or report to Russia’s central bank through Russian and international accounting systems, which many of the bill’s sponsors say could put Russian banks at a competitive disadvantage, according to Russia & India Report.