Resident Aliens to Buy 20 Percent in Russia’s Banks Unsanctioned

Dec. 13, 2006

State Duma’s Bank Committee gave the go-ahead to the bill empowering local and foreign investors to buy out up to 20 percent of stocks of the country’s banks with no consent of the Central Bank of Russia (CBR). The new bill will be an obstacle in the fight against money laundering and the lack of transparency of Russia’s banks, representatives of CBR said.

Yesterday, Russia’s State Duma’s Bank Committee recommended the legislators to pass in the second reading amendments to the Act on the Central Bank of Russia and to the Act on Banks and Bank Business, which will ease procedures for foreign investors to get stakes in Russia’s banks.

After the first reading, the bill was revised in favor of potential buyers of stocks. Today’s wording sets forth sanctioning procedures both for the Russians and aliens only if they intend to acquire more than 20 percent in some credit institution (vs. 10 percent in initial document) and notifying procedures to buy from 1 percent to 20 percent.

Of interest is that the amendments were lobbied by bankers themselves. The bankers said that lowering the sanctioning ceiling from 20 percent to 10 percent would infringe upon rights of Russia’s investors.

If the initial variant facilitated the access of portfolio investors to the bank capital, the revised bill will strengthen the flow of strategic investors (buying more than 20 percent in the bank), according to the analysts. But exactly this fact makes the CBR agitated. The sanctioning procedures starting from 10 percent would have improved control over the bank, making clear whether an investor intends to focus on money laundering or to develop retail business in the bank, said a representative of the CBR.

Nevertheless, the true purpose of authorities was to pass new regulations as soon as possible, as the new stocks of VTB and CBR are to be placed next year. “The bill is vital in view of forthcoming issues of biggest banks,” said Vladislav Reznik, chairman of State Duma’s Bank Committee.

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