Russian President Vladimir Putin signed a law on the division of banks according to the list of permitted operations, depending on their license. The document was posted yesterday on the official web portal of legal information. It will take effect within 30 days after publication. The State Duma passed the law on April 21, the Federation Council approved it on April 26.
All the operating banks of Russia will be recognized as banks with a universal license in a month. From January 1, 2017, the minimum capital requirement for a bank with a universal license is 1 billion rubles.
The minimum capital requirement for banks with a basic license is 300 million rubles. After a capital increase of up to 1 billion rubles, the bank will have the right to apply for a change to the universal one. The capital limit for a bank with a basic license is 3 billion rubles, after reaching this level, full regulation will be applied to it. The minimum capital requirement for a non-bank credit organization is 90 million rubles.
A bank with a basic license will be able to attract funds from individuals and legal entities in the form of deposits, open and maintain bank accounts, transfer funds, be engage in purchase and sale of foreign exchange, issue bank guarantees, as well as provide raised funds to individuals, small and medium enterprises. They will also be able to lend to Russian companies if the maximum credit exposure does not exceed 20% of the bank's capital.
Banks with a basic license will not have the right to conduct a number of banking operations with foreign nationals or corporate entities.
According to the law, only banks with a universal license will be able to create branches and have subsidiaries in the territory of a foreign state, as well as open representative offices. At the same time, before January 1, 2019, it is possible to create branches with the permission of the Central Bank and have subsidiaries abroad.
Professor of the RANEPA faculty of Finance, Money Circulation and Credit, Yuri Yudenkov, speaking to Vestnik Kavkaza, commended the division of Russian banks into categories. "Over the past two decades, small banks have been presented with the same requirements as large ones. It is clear that a small regional bank is not able to fulfill the requirements of a federal bank servicing large industrial enterprises. Hopefully, this law will give small provincial banks a an opportunity to take a break," he said.
At the same time, the division will lead to the dominance of large metropolitan banks in the regions. "This is due to the fact that only they will provide local enterprises with access to foreign markets. But it will not make a decisive difference in the activities of our banks, they will only be formally divided into large and small ones," Yudenkov noted.
The head of the department of stock markets and financial engineering of the Faculty of Finance and the Banking Business of RANEPA, Konstantin Korischenko, in turn, recalled that it is a well-forgotten old norm. "There were various licenses in the 1990s, now we are returning to this system. It has pros and cons: the pros are the division of risks and the restriction of those having little capital on risky operations, and the cons are that it decreases competition," the economist expects.
Konstantin Korishchenko added that the law was developed in accordance with the current programs of the Russian Central Bank. "It is in line with the policy pursued by the Central Bank to limit risks in the banking system. It is a logical continuation of all the measures which the Central Bank has been taking for the past five years," he said.
According to an associate professor of Stock Markets and Financial Engineering of RANEPA, Vasiliy Yakimkin, in the first place the division of banks will benefit individuals and investors. "Now the regular revocation of licenses is a heavy burden for the Central Bank, and the upcoming division will reduce this burden for compensatory payments to depositors. In addition, the basic banks will not need to keep large sums of insurance, therefore, they will receive an opportunity to direct this money for profit and enter a cohort of universal banks more quickly," the economist stressed.
"Investors will pay more attention to large, universal banks, which will lead to fewer defaults among credit institutions and less need to spend money on compensation payments," Vasily Yakimkin pointed out.
The ban on the operation of basic banks with foreign assets will also protect the financial system of the Russian Federation from losses. "The risks of working abroad, especially in the former CIS countries, are large, so if the bank is small, it has nothing to do abroad," he said.
One of the likely reasons for the adoption of the law is the protection of the Russian banking system from foreign competitors. "Russia, entering the WTO, has received 10 years of delay from the free entry of foreign banks into its territory. When this period is over, there will be much more serious competition on the market with branches of Western banks. In order to ensure that our large banks are competitive with Western subsidiaries, their number should be limited," Vasily Yakimkin warned.