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. Last Updated: 07/27/2016

Dubinin: Russia May Limit Foreign Banks

Russia may restrict the operations of foreign banks already established in the country in a move to counter a Western stand against the growing presence of Russian banks abroad, Central Bank chairman Sergei Dubinin said.


"A whole set of restrictive measures must be applied to foreign banks and later removed when necessary," Dubinin was quoted by Interfax as saying Tuesday. He did not elaborate on what moves might be adopted or when.


"There is a danger today that foreign banks will take root in Russia, in foreign trade in particular," he said, adding that the Central Bank planned to back interests of the Russian banks abroad through stronger ties with foreign central banks.


Western bankers contacted Wednesday for a comment refused to discuss Dubinin's statement until further details become available.


Natalya Khomenko, a Central Bank spokeswoman, said Russian banks are having difficulty opening full-fledged branches in Western countries because of stricter registration procedures and tough international audit standards.


In response, Russia may tighten its regulation of foreign banks, Khomenko added.


However, Dubinin named another reason why the West is wary of the advent of Russian banks.


"Nobody wants to have Russian banks [in their territory] because they have gained a reputation as being money-laundering financial structures," he said, according to Interfax.


An article published in January in New York magazine claimed that organized crime controls between 50 percent and 80 percent of the country's banks and has turned Russia into one of the biggest money-laundering centers in the world.


Russian banks have lobbied the government in the past to act toward Western banks in the same way that they are treated in Western financial circles.


"We stand for a reciprocal approach," said Alexander Zagradsky, spokesman for the Association of Russian Banks. "If we allow foreign capital into the country, then the foreign financial market should let in Russian banks, but this is just not happening."


He said the association had lobbied President Boris Yeltsin for a November 1993 decree that put in place a number of restrictions on the operations of foreign banks in Russia.Currently, some 10 Russian banks have opened branches or representative offices abroad, Zagradsky said, including a Stolichny Bank subsidiary in Holland and a Uneximbank branch in Switzerland.


Allowing more foreign participation in the Russian banking system would create greater financial stability and produce healthy competition, according to Yaroslav Lissovolik, an expert at the Russian-European Center for Economic Policy.


"Foreign capital will make the Russian banks step up their management and reliability standards," he said.


However, Russian banks do not yet have enough resources to compete on equal terms with Western capital and some protective measures should stay, Lissovolik said.


Under the current rules, foreign banks in Russia are limited to no more than 12 percent of the total charter capital of the Russian banks, Khomenko said, while Russian account-holders at Western banks must keep a minimum account balance of 55,000 ecus ($66,000).


The chartered capital of some 17 foreign banks currently operating in Russia makes up less than 7 percent of the Russian banks total, Zagradsky said.