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. Last Updated: 07/27/2016

Fed Approves Promstroibank, Office Opened in New York

WASHINGTON -- The champagne flowed, the string quartet played and guests munched on caviar and lobster in a magnificent reception room at the Russian Embassy.

The event? A celebration to mark the opening of a Russian bank branch in New York City, a symbol of the country's efforts to refurbish its economy.

Promstroibank of Russia -- founded in 1922 as the Industrial Bank for the Soviet Union -- opened a representative office in New York City last week following an intensive review by the Federal Reserve Board and the New York State Banking Commission.

"Yes, there were difficulties," Promstroibank chairman Yakov Dubenetsky said in an interview.

The key problem for regulators was translating the bank's financial statements, based on accounting policies practiced in the former Soviet Union, into Western accounting standards so regulators could investigate its financial condition.

The Fed also examined the degree of regulation of Russian banks in their home country, a requirement put in place following the Bank of Credit and Commerce International scandal.

"We were fully understanding of the situation," Dubenetsky said. "We were not embarrassed by the degree of study on behalf of the American authorities."

Promstroibank's new office has limited banking powers -- representative offices can't accept deposits, for example -- but is an important symbol of Russia's changing economy. The office's role will be to help U.S. corporations pursue investments and joint ventures in Russia and assist its Russian clientele in dealing in the U.S. market.

"The most important matter, of course, is to ... try to find and attract investment resources from this market," Dubenetsky said. "We need investments. We need resources for lending."

His conversation was interrupted by the introduction of a banker from the Carlyle Group, an influential Washington-area investment bank. Dubenetsky and the banker swapped business cards.

"We have every possibility for the fantastic growth of the national economy, which may be comparable with the rates of growth in your American economy in the 20th century," Dubenetsky said.