State Duma gives first-reading approval to bank foreign investment overhaul

Russia’s State Duma has approved at first reading a bill on banks’ foreign investments. It would prohibit most overseas investments by basic-licence banks while replacing some central bank approvals with notifications for universal-licence banks.

Anatoly Aksakov and Arkady Svistunov introduced bill No. 1236829-8. It would bar basic-licence banks and non-bank credit institutions from acquiring foreign companies, gaining direct or indirect control over them, or opening overseas branches and representative offices. An exception covers stakes in international financial messaging system operators, subject to central bank requirements.

An institution receiving a foreign asset involuntarily, such as through collateral enforcement or debt repayment, would have 30 days to notify the regulator. Within 6 months, it must report a permitted acquisition or submit an exit timetable. Prohibited ownership must end within 3 years.

Universal-licence banks would need central bank approval to gain control of a foreign bank or insurer. For other foreign companies, approval would be required when investment exceeds 5% of the bank’s capital, or 10 billion rubles where that amount is below 5% of capital.

Opening an overseas branch would still require approval. Representative offices and other investments would move to notification within 30 calendar days. The same deadline would apply to notification of an exit from a foreign asset.

A bank’s board of directors would decide on purchases of foreign banks or insurers. If its charter delegates that decision to a collective executive body, the board must be informed within five working days. The central bank would have 30 working days to assess an application, with approval valid for a year.

The regulator could refuse approval where a jurisdiction does not follow Financial Action Task Force recommendations. It could also require divestment or closure for missing mandatory approval or notification, failure to meet regulatory requirements, inability to obtain information or conduct inspections, or a foreign company’s insolvency risk.

A universal-licence bank switching to a basic licence or non-bank status would have 12 months to end overseas investments and close foreign offices. Stakes in international financial messaging operators would remain exempt.

If enacted, the law would take effect a year after official publication. Existing approvals for universal-licence banks’ foreign assets and branches would remain valid.