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. Last Updated: 07/27/2016

Yeltsin Lets U.S. Banks Go Local

President Boris Yeltsin has granted U.S. banks operating in Russia the right to service Russian residents, bringing them into line with their European counterparts.

A presidential decree signed Thursday allows banks with 100 percent U.S. capital licensed before Nov. 15, 1993, to do business with local residents.

"This levels the playing field," said Sergei Boboshko, president of Chase Manhattan International.

Yeltsin had barred foreign banks that had not obtained operating licenses before Nov. 15, 1993, from serving Russian residents. But in June, 1994, he allowed European banks to continue their operations, under an agreement with the EU. But restrictions remained on U.S. banks.

Chase Manhattan and Citibank were the only two U.S. banks licensed to operate here. But Citibank was able to continue doing business with Russian residents on the basis that it had an operating license before Nov. 15, 1993.

This left Chase Manhattan as the only bank affected by the restriction, which effectively imposed offshore status on the bank.

"Prior to this, Chase was the only licensed bank that had been precluded from doing business with residents," Boboshko said.

Nevertheless, the move was welcomed by Citibank, too, as finally putting to ground any queries surrounding its own operations.

"We welcome this development," said Miljenko Horvat, president of Citibank, Russia. "It puts to bed the issue. We were operating with Russian residents, and we are pleased there will be no more questions about this."

"Residents" in Russian law is defined as not just Russian individuals, but any Russian legal entity, including companies and joint ventures.

An agreement similar to the EU accord is pending between the U.S. and Russia, but has yet to be ratified.