Russian Legislation Update: March – April 2018

by White & Case LLP
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Welcome to the most recent issue of our Russian Legislation Update, covering the period of March – April 2018.

In this issue:

  • Currency Control
  • Banking

Currency Control

On 3 April 2018, the President signed Federal Law No. 64-FZ amending the Currency Control Law and the Administrative Offences Code.

According to the amendments, the repatriation requirement now applies not only to foreign trade proceeds but also to loans granted by residents to non-residents. Thus, residents are obliged to ensure that funds (in rubles or foreign currency) due to them from non-residents are paid to their bank accounts in Russia within the terms set forth in the respective loan agreements.

The amendments provide for several exceptions from this requirement: under certain conditions, it is permitted not to repatriate the loan if it was granted for financing of geological study, exploration and (or) extraction of mineral resources or investment and (or) innovative activity, or if there is a set-off of counter-claims under loan agreements.

The breach of the repatriation requirement would entail administrative liability (for example, a fine of up to the whole amount of the non-repatriated funds may be imposed).

The Law does not apply to loan agreements executed before its entry into force (unless their substantive terms change after the Law's entry into force).

The Law entered into force on 14 April 2018.

On 7 March 2018, the President signed Federal Law No. 44-FZ amending the Currency Control Law.

The amendments expand the list of permitted currency operations among residents. In particular, resident companies are allowed to pay salaries to resident individuals in foreign currency outside of Russia (provided that labor contracts provide for the performance by those resident individuals of their labor duties outside of Russia).

The Law entered into force on 18 March 2018.

Banking

On 6 December 2017, the Central Bank issued Instruction No. 183-I "On Mandatory Economic Ratios for Banks Holding a Basic License."

The Instruction was registered with the Ministry of Justice on 2 March 2018.

The Instruction sets out the following mandatory ratios for banks holding a basic license (the list of ratios is shorter than the one applicable to banks with a universal license):

  • net worth (capital) ratio (N1.0) – no less than 8%;
  • core capital ratio (N1.2) – no less than 6%;
  • current liquidity (N3) – no less than 50%;
  • maximum exposure to a single borrower or group of related borrowers (N6) – 20% (as opposed to 25% for banks with a universal license);
  • maximum exposure to related parties (group of related parties) of a bank with a basic license – 20%.

The Instruction entered into force on 17 March 2018.

On 23 October 2017, the Central Bank approved Regulation No. 611-P "On the Procedure for the Creation of Provisions for Potential Losses by Credit Organizations."

The Regulation was registered with the Ministry of Justice on 15 March 2018.

The Regulation represents an updated version of Regulation No. 283-P. The changes are mostly of a technical nature.

The Regulation entered into force on 19 March 2018.

On 25 December 2017, the Central Bank issued Instruction No. 185-I "On Receiving Consent (Approval) from the Central Bank for the Acquisition of Shares (Participation Interests) of a Financial Organization […]."

The Instruction was registered with the Ministry of Justice on 20 March 2018.

The Instruction sets out the procedure for obtaining the Central Bank's consent (approval) for the acquisition of more than 10% of the shares (participation interests), or the establishment of control over a shareholder (participant) holding more than 10% of the shares (participation interests), of a credit organization or a non-credit financial organization (for example, an insurance company or a non-state pension fund).

According to the Instruction, relevant acquisitions include, among others, deals resulting in the acquisition of the right to use the shares (participation interests) of a financial organization (including powers to participate in the general shareholders' (participants') meeting and adopt decisions along with the other shareholders (participants)).

The Instruction entered into force on 6 April 2018 and abolished Instruction No. 146-I (in relation to credit organizations) and No. 165-I (in relation to non-state pension funds).

On 27 December 2017, the Central Bank approved Regulation No. 625-P on the procedure for coordinating the appointment of managers of financial institutions and assessing the compliance by certain persons with qualification and business reputation requirements.

The Regulation was registered with the Ministry of Justice on 21 March 2018.

The Regulation sets out, among other things, the procedures for obtaining the Central Bank's approval of candidates for management and certain other positions in credit organizations and non-credit financial

organizations and notifying the Central Bank of the relevant appointment (election) or dismissal, as well as the procedure for the Central Bank's assessment of whether the relevant officials of financial organizations meet the established qualification and/or business reputation requirements.

It also sets out the procedure for assessing whether persons acquiring (holding) more than 10% of the shares (participation interests) of financial organizations meet the established business reputation requirements. (The procedure for assessing their financial position is set out by Regulation No. 626-P of 28 December 2017).

The Regulation entered into force on 3 April 2018 and abolished Regulation No. 408-P.

On 26 December 2017, the Central Bank approved Regulation No. 622-P on the disclosure of information on persons that control or significantly influence financial organizations.

The Regulation was registered with the Ministry of Justice on 20 March 2018.

According to the Regulation, information on persons that control or significantly influence a bank is to be disclosed on the Central Bank's website and can, in addition, be disclosed on the bank's website.

Information on the shareholder structure of a non-state pension fund, including that on persons that control or significantly influence the fund, is to be disclosed on the Central Bank's website and on the fund's website. Similar information with respect to other non-credit financial organizations (e.g. insurance companies, management companies) is to be disclosed on their websites.

The Regulation entered into force on 3 April 2018 and replaced Regulation No. 345-P.

On 27 November 2017, the Central Bank issued Directive No. 4619-U "On the Procedure and Terms of Disclosure and Submission of Consolidated Financial Statements by Banking Holdings."

The Directive was registered with the Ministry of Justice on 9 February 2018.

According to the Directive, parent holding companies whose securities are quoted on a stock exchange are required to publish not only annual, but also interim consolidated financial statements.

If a parent holding company is registered outside of Russia, the financial statements are to be published on the website of a credit organization which is a member of the banking holding, is registered in Russia and submits its financial statements to the Central Bank.

The Directive entered into force on 11 March 2018 and abolished Directive No. 3087-U.

On 14 December 2017, the Central Bank issued Directive No. 4645-U "On the Procedure and Terms of Disclosure of Consolidated Financial Statements by Parent Banks of Banking Groups."

The Directive was registered with the Ministry of Justice on 2 March 2018.

According to the Directive, parent banks of banking groups are, as previously, required to publish both annual and interim consolidated financial statements.

The Directive entered into force on 18 March 2018 and replaced Directive No. 2923-U.

Click here to download PDF (English and Russian).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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