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Temporary measures are introduced to strengthen the banking system until the end of 2011
Practical Law Legal Update 4-384-8673 (Approx. 2 pages)
Temporary measures are introduced to strengthen the banking system until the end of 2011
by White & Case LLP
| Published on 04 Feb 2009 • Russian Federation |
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A new law has been passed setting up a legal framework containing a range of measures to prevent the bankruptcy of certain Russian banks. The Deposit Insurance Agency and the Central Bank are responsible for administering the different measures.
On 27 October 2008 the President signed Federal Law No. 175-FZ "On Additional Measures for Strengthening Stability of the Banking System within the Period until 31 December 2011". The Law entered into force on 28 October 2008 and will be in effect until 31 December 2011.
The Law establishes a legal framework for preventing the bankruptcy of Russian banks participating in the system of mandatory insurance of individual bank deposits. It specifies preventive measures that may be applied by the Deposit Insurance Agency and the Central Bank.
In particular, the Agency is entitled to either:
- Provide financial assistance to investors willing to acquire a controlling stake in a problem bank or to banks willing to acquire such a bank's assets and liabilities.
- Acquire a controlling stake in the bank itself. Acquisition of the bank's shares in this case would be exempt from a number of statutory requirements (for example, obtaining the consents of the Central Bank and the anti-monopoly authorities).
The Central Bank is entitled to refrain from revoking a banking licence and imposing sanctions on the bank while the preventive measures are applied. It is also entitled to decide on the decrease of the bank's charter capital to the amount of the bank's net worth (capital) (or to one ruble if the net worth amount is negative).