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. Last Updated: 07/27/2016

Bank Alters License Regulations

Russia's Central Bank said Tuesday it was toughening capital requirements for new banks, but would make it quicker for them to trade in the foreign exchange market.

The Central Bank will increase charter capital requirements for new banks to 12 billion rubles ($2.43 million) from 6 billion rubles as of May 8, Central Bank Deputy Chairman Alexander Turbanov said.

Before a new bank can receive a license to take deposits from the public, it must operate for two years, demonstrate compliance with Central Bank rules for at least six months and not owe the government any money, Turbanov told a news conference.

"When preparing the new document, we thought the Central Bank should set rather tough requirements to avoid setting up credit organizations whose bankruptcy would lead to losses for creditors and depositors," he said.

But the Central Bank will grant full hard-currency licenses to new banks immediately, replacing the current phased system.

Previously, a bank had to operate for one year to win a domestic hard currency license allowing it to work with Russian hard currency holders.

A bank could subsequently receive an extended hard currency license, giving it the right to work with some nonresidents. Ultimately, a bank could receive a general hard-currency license to work with all nonresidents, open branches abroad and buy foreign securities.

"Life showed this practice was not justified," Turbanov said. "This practice made new banks dependent on big, established banks, while some new banks are already quite respectable and reliable."

The Central Bank has been trying to strengthen the Russian banking sector. Last year it imposed tough reserve requirements on ruble and hard-currency deposits, which together with a tight monetary policy led to a liquidity crisis last summer.