Text 3: Banks and Law

The Bank of Russia has responsibility for bank oversight and regulation of the 1, 253 banks that currently operate in the Russian Federation. Non-bank financial institutions (NBFIs) are regulated by a number of agencies along with the Bank of Russia. This oversight and regulation is expressed in large part through the granting and revocation of bank licenses. In addition, the Bank of Russia has and exercises the right to apply the following sanctions to credit institutions: (1) to impose a fine, (2) to appoint temporary administration, (3) to ban certain types of licensed operations, and (4) to require the substitution of officials and the reorganization of the credit institution. The Bank of Russia also grants licenses to non-bank financial institutions for the movement of capital. There are 1, 046 commercial banks authorized by the Bank of Russia to perform foreign currency transactions. The current minimum capitalization requirement for operating credit institutions must reach the level of 5 million ECU before January 1, 1999, and for those established since April 1, 1996, a minimum standard of 2 million ECU has been set, which must reach the level of 5 million ECU before July, 1998.

No specific bank secrecy laws exist relating to the confidentiality of the relationship between a bank and its customers and their transactions or the reporting of unlawful activities to law enforcement authorities; however, there is a general article on bank confidentiality as part of the law on banking activities. The only exception to the disclosure of this type of information is through the serving of a court order as part of a criminal investigation. In the event of freezing or confiscation of an account, bank account information is given to the case arbiter and tax authorities. There are no limitations as to the types of account information the bank may give to criminal investigators. This is left up to the discretion of the individual bank. The Bank of Russia does not have supervisory authority over offshore banks operating outside Russia that do business with Russians. Examples of this would be banks registered in Northern Cyprus and the Baltic nations that advertise in Russian newspapers. The Bank of Russia monitors these banks and provides information to law enforcement agencies in the event of questionable activities.

There is no legal division of banks into types, such as commercial, savings, etc. The following financial institutions operate in Russia: banks, currency exchanges, securities companies, stock brokers, insurance companies, credit card companies, casinos, real estate companies, and travel agencies.

§ Vocabulary notes