Statute on Banks and Bank Activities in the Russian Federation

PART I

CHAPTER 1.

Statute on Banks and Bank Activities in the Russian Federation

GENERAL PROVISIONS.

Article 1.

The Concept Of a Bank

A bank is a commercial enterprise, which, being juridical person, has the right granted by license of the Central Bank of Russia (hereinafter the Bank of Russia), to attract money from juridical and physical persons receiving such funds on its own behalf and operating on terms of profitability, responding to demands for payment in a timely manner and carrying out other banking operations. Some banking operations shall be performed by enterprises, which are not banks (other credit institutions).

The provisions of this Statute shall also be applicable to other credit institutions unless otherwise stated in the text of this Statute. The provisions of this Statute shall be applied to the Bank of Russia only in cases where so expressly stated in this Statute.

Banks shall be founded on the basis of any form of property (including attraction of foreign capital) as set forth in applicable RF legislation and shall operate on a commercial basis.

Article 2.

The Banking System of Russia

The Russian banking system consists of the Bank of Russia, the Bank of Foreign Trade, the Savings Bank and commercial banks of various types as well as other credit institutions that have obtained licenses to operate.

To finance republican, regional and other special purpose programs, special banks (banks of development) may be established in accordance with terms and procedures envisaged by applicable legislation of the Russian Federation.

Article 3.

Unions and Associations of Banks

Banks may form unions, associations and other amalgamations to coordinate their activities, protect the interests of their members and carry out joint programs if their cooperation does not contradict the requirements of the RF anti-monopoly legislation and other laws.

Article 5.

Banking Operations and Transactions

Banks shall perform the following banking operations and conduct the following transactions:

a)Attract deposits and grant credits upon achieving agreement with a borrower;

b)Make payments on behalf of customers and bank correspondents and conduct necessary cash-account servicing;

c)Open and maintain the accounts of customers and bank-correspondents, including foreign ones;

d)Finance capital investments on behalf of the account owners or persons at whose disposal the invested means exist, as well as from funds which belong to the bank itself;

e)Issue, purchase, sell and maintain payment documents and securities (checks, letters of credit, bonds, stock, notes and other documents) and perform other operations with them;

f)Issue credit references, guarantees and other obligations on behalf of third persons envisaging their realization in money;

g)Acquire unpaid debts on the delivery of goods and services, accepting the risks of collecting such claims (factoring);

h)Purchase and sale of foreign currency from Russian and foreign juridical and physical persons;

i)Purchase and sell in the RF and abroad precious metals, stones and items derived from them;

j)Receive and place precious metals into investments and perform other operations with these valuables in accordance with international banking practice;

k)Pay and receive money and control securities on behalf of bank customers (trustee operation);

l)Pay brokers’ and consulting services and perform leasing operations;

m)Carry out other operations and conduct transactions with the permission of the Bank of Russia within its competence.

All operations mentioned in this Article shall be conducted both in rubles and in foreign currency under appropriate license.

Banks are prohibited from carrying out operations connected with the production and sale of goods as well as all kinds of insurance, except insurance of hard currency and credit risks.

Article 6.

Differentiation Between the State’s Liability and Liability of Banks

Banks in the RF do not bear responsibility for State commitments and the State does not bear responsibility for a bank’s liabilities except in those cases envisaged by RF laws.

Article 7.

Independence of Banks

Banks in the RF are independent of State government and management bodies in making decisions relating to the conduct of banking operations.

Employees of State government and management bodies shall not be allowed to participate in the management of banks.

Article 8.

Bank Charters

Banks operate on the basis of their Charters, adopted in accordance with RF legislation.

The Charter of a bank shall contain:

—the name of the bank and its address;

—a list of operations carried out by the banks;

—the amount of equity capital fund and the reserve, insurance and other funds formed by the bank;

—a statement that the bank is a juridical person and operates on a commercial basis;

—information about the management of the bank, its structure, the manner of its formation and its functions.

Bank charters shall be drafted in accordance with the recommendations of the Bank of Russia and shall include no provisions in conflict with legislative acts of the RF.

Banks shall be obliged to inform the Bank of Russia regarding all amendments introduced into their Charters.

Article 9.

The Equity Capital of Banks

The equity capital of a bank shall be composed of the resources contributed to it by juridical and physical persons and shall offset the bank’s liabilities.

The equity capital of the bank shall be formed from the contributions of not fewer than three persons.

CHAPTER 2.

PROCEDURE FOR INSTITUTING AND LIQUIDATING BANKS.

Article 10.

Licensing of the Activities of Banks

Banks shall operate on the basis of licenses issued by the Bank of Russia. The license envisages a list of operations carried out by the bank.

Article 11.

Documents Necessary for Obtaining a License

To obtain a license, the bank founders shall submit to the Bank of Russia the following documents:

a)A petition for the issuance of a license;

b)Constituent documents (a constituent agreement, the bank charter and a protocol adopting the charter and appointing the management staff of the bank);

c)Economic substantiation;

d)Information about the bank managers (the Chairman or Director, Chief Accountant and their deputies).

In the event changes are instituted in the bank management structure, documents certifying to the professional qualification of the newly appointed managers shall be submitted to the Bank of Russia.

Article 12.

Licensing the Activities of Joint Banks, Foreign Banks and Affiliated Non-Resident Banks

To obtain a license for carrying out banking operations on a joint basis with the participation of Russian and foreign capital, a foreign bank or an affiliated non-resident bank, the following documents shall be submitted in addition to those specified in Article 11 of this Statute:

a)By foreign juridical persons:

• the decision of a corresponding body of the foreign founder (the participant) authorizing its participation in forming a bank or an affiliated bank within the territory of the RF;
• the charter or another document certifying the status of a juridical person and its published balances for the [Three] 3 previous years;
• consent in written form of a regulatory body of the country of domicile of the foreign founder authorizing its participation in forming the bank or in opening an affiliated bank within the territory of the RF.

b)by physical persons who are foreign citizens:

• the confirmation by a Class-A foreign bank (under usual international banking standards) of the solvency of this person;
• recommendations of no fewer than two foreign juridical or physical persons whose solvency is well-known.

Article 13.

The Term of Considering a Bank Application

for Issuing a License toCarry Out Banking Operations

and Registration of the Bank Charter

The Bank of Russia shall consider applications to issue licenses for carrying out banking operations and registration of their charters within a period of time not exceeding [Three] 3 months from the date they receive all documents required by this Statute.

Article 14.

Grounds for the Recall of a License to Carry Out Banking Operations

The Bank of Russia may recall a license issued by it to a bank in the following cases:

a)the information provided insupport of the issuance of a license isfalse;

b) the accounting reports submitted in compliance with Article 31 of the RF Statute “On the Central Bank ofRussia (the Bank of Russia)” are;

c)delays in commencement ofbanking activities exceeding one yearsubsequent to issuance of a license;

d)performing bank operations notenvisaged by the license;

e)other violations envisagedby Article 33 of the RF Statute “On the Central Bank of Russia (the “Bank of Russia”);

f)the bank is declared bankrupt.

The recall of a license shall be preceded by preventive measures aimed at eliminating the violations mentioned in this article of the Statute. The recall of a license shall results in the liquidation of the bank.

Article 15.

Appeal by Banks against Adverse Decisions of the Bank of Russia

A decision by the Bank of Russia on the issuance or recall of a license, the registration of bank Charters and other decisions by the Bank of Russia may be appealedin the State Arbitration of the RF by a bank adversely affected.

Article 16.

Indemnity for Losses

The losses suffered by a bank shall be indemnified in the procedure envisaged by RF legislation.

Article 17.

The Procedure for Opening Bank Branches and Representations

Banks registered with the Bank of Russia shall have the right to open, within the territory of the RF and outside of it, branches and representations in accordance with applicable legislation within the corresponding territory.

Article 18.

Liquidation of Banks

A bank shall be liquidated in accordance with RF legislation.

Chapter 3.

FINANCIAL STABILITY OF A BANK.

PROTECTION OF THE RIGHTS AND

INTERESTS OF ITS CREDITORSAND INVESTORS.

Article 19.

Reservation of Monetary Resources

All banks within the territory of the RF shall have compulsory reserves in the Bank of Russia. In accordance with Articles 24 and 27 of the RF Statute «On the Central Bank (the Bank of Russia)» the Bank of Russia shall establish the standard for compulsory reserves of banks to be maintained on account in the Bank of Russia.

Article 20.

Providing for the Liquidity of Banksand the Observance by Banks of

Economic Standards

Banks shall be obliged to have their own insurance and reservation funds. The procedure for their formation and utilization shall be established by the Bank of Russia and Charters of the banks.

Banks shall observe the following economic standards established by the Bank of Russia:

• theminimum amount of equitycapital of the bank;
• the maximum ratio between theamount of the equity capital of the bankand the sum of its assets, taking intoaccount risk estimation;
• indices of the bank’s liquidity;
• the minimum amount ofcompulsory reserves depositedin the Bank of Russia;
• the maximum amount for risk perborrower;
• the restrictions on the amount ofhard currency and exchange rate risks;
• restrictions on using deposits forpurchasing stock shares of juridicalpersons.

Article 21.

Bank Confidentionality

Banks, including the Bank of Russia, shall guarantee secrecy of operations, accounts and deposits of their customers and correspondents. All employees of a bank shall be obliged to maintain confidentionality of all bank operations, accounts and deposits of its customers and correspondents.

Information about operations and accounts of juridical persons and other institutions may be given to the organizations themselves, their higher authority, courts of law and investigating bodies, organs of arbitration, auditing organizations and taxation authorities.

Information about accounts and deposits of citizens shall be disclosed only to customers and their representatives, to courts of law and investigating bodies in legal proceedings in those cases where monetary resources and other valuables of customers may be sequestered and recovered, or in cases where confiscation of property occurs.

Information about the accounts and deposits of deceased account holders shall be given to the persons identified by the deceased owner in his bequest to the bank, to State notarial offices considering cases of heredity of deceased customers or to foreign consulates.

Article 22.

Procedures for Sequestering and Recovering Money and Other Valuables Placed in Banks

Money and other valuables of juridical persons placed in banks may be sequestered only pursuant to the decision of courts of law or on decrees of investigating or arbitration bodies, but recovery may be emposed only upon the receipt of orders issued by courts of law, pursuant to the orders of bodies of arbitration and other directive acts of legal authorities and, in cases envisaged by RF legislation, upon the demand of financial bodies and other institutions.

Article 23.

Procedures for Sequestering and Recovering Money and other Valuables Placed in Banks.

Monetary resources and other valuables of foreign and international organizations deposited in banks may be sequestered or subjected to recovery only upon the decision of courts of law or bodies of arbitration in accordance with the procedure stated by applicable legislation.

The monetary resources and other valuables of citizens placed in banks may be sequestered only on the basis of:

decisions of courts of law and decrees of investigating bodies relating to criminal cases being considered by these courts as well as in cases regarding property confiscation; decisions of courts of law and decrees of a People's Judge relating to civil cases resulting from criminal cases; cases of exacting alimony where there is no of earned money or other kinds of property which may be subjected to recovery or the division of a deposit which is common property of a husband and the wife.

Money and other valuables of citizens may be subject to recovery on the basis of a sentence or decision of a court of law in a civil action resulting from a criminal case; a decision of acourt of law or decree of a People's Judge exacting alimony where there is no earned money or other kinds of property that may be subjected to recovery; or a decision of a court of law on the division of a deposit which is common property of a husband and the wife.

Confiscation of money and other kinds of property of citizens may take place pursuant to a sentence imposed by a court of law or a decree entered pursuant to a statute on property confiscation.

Chapter 4.

RELATIONS AMONG BANKS AND

SERVICES RENDERED BY BANKS

TO CUSTOMERS.

Article 24.

Interbank Deposit, Credit, and Other Operation

On a contractual basis, banks shall attract and place with each other resources in the form of deposits and credits and carry out other reciprocal operations envisaged by their Charters.

When the resources to credit customers and to fulfill other responsibilities which they bear are insufficient, banks shall ask the Bank of Russia for credits on terms determined by the Bank of Russia.

Article 25

Interest Rates on Credits of Banks

Interest rates and the rates of commission on bank operations shall beindependently established by banks taking into account the provisions envisaged by Article 15 of the RF Statute “On the Central Bank of RF (the Bank of Russia)” and the money-credit policy of the Bank of Russia.

Article 26

Contractual Basis for Relationships Between Banks and Customers

The relationships between banks and customers shall be formed on a contractual basis. Customers may freely choose banks for credit-payment services.

Article 27.

Methods of Bank Payments

Banks shall affect payments in the forms stated by the Bank of Russia and in the forms accepted in international banking practice.

Article 28.

Anti-Monopoly Rules

Banks are prohibited to use their unions, associations and other amalgamations to conclude agreements aimed at the monopolization of the market of banking operations or at the establishment of interest rates or rates of commission, or at imposing restrictions on competition in the banking business.

The observance of anti-monopoly rules shall be regulated by the Bank of Russia and the Parliament.

Article 29.

Provision for Reimbursement of Credits

Banks shall pay credits on the following guarantees: property security, bail guarantees, and obligations in other forms pursuant to applicable RFlegislation.

Article 30.

Borrowers Declared Insolvent (Bankrupt)

Borrowers who are juridical persons who do not timely fulfill obligations on the reimbursement of loans they receive from banks shall be declared insolvent (bankrupt) in accordance with the procedure stated by RF legislation and a corresponding notice shall be published in the press.

Borrowers who are physical persons who do not fulfill their obligations on the reimbursement of loans received by them from banks bear liabilities in accordance with RF legislation.

Article 31.

Measures Taken With Respect to

Borrowers-Juridical Persons Declared Insolvent

The following measures shall be taken with respect to borrowers-juridical persons which are declared insolvent (bankrupt):

• reorganization of debt;
• transferof operativemanagement to a temporary administration appointed with the participation of the bank-creditor;
• reorganization of the borrower;
• liquidation of the borrower in accordance with RF legislation, followed by a forced sale of the property held by the bank as security.

The measures proposed by a bank-creditor shall be taken either by its controlling board or by its founders, depending on the legal status of its borrower.

CHAPTER 5.

FOREIGN ECONOMIC ACTIVITIES OF BANKS.

Article 32.

Banking Operations in Foreign Currency

Upon receiving a license from the Bank of Russia, banks may perform operations in foreign currency and with precious metals, stones and articles derived from them.

Rules for the issuance of this license shall be established by the Bank of Russia.

Article 33.

Branches and Representations of Banks Abroad

On the permission of the Bank of Russia, banks may open branches abroad; before opening a representation abroad, a bank shall send a notification to the Bank of Russia.

Article 34.

The Bank of Foreign Trade of Russia

The Bank of Foreign Trade is established on a Joint-Stock basis. The control block of shares shall belong to the Bank of Russia.

CHAPTER 6.

DEPOSITS OF CITIZENS’ SAVINGS.

Article 35.

Deposits of Citizens’ Savings Shall be Received by All Banks

Taking into account the economic standards (quotas) established by the Bank of Russia as stipulated in this Statute, banks shall specify the terms under which they operate in receiving deposits from citizens.

Investors shall be free to choose any bank to deposit their savings and may have deposits in one or several banks.