Small banks must increase their charter capital or withdraw from the banking market

Practical Law Legal Update 5-385-5615 (Approx. 2 pages)

Small banks must increase their charter capital or withdraw from the banking market

by White & Case LLP

Published on 02 Apr 2009 • Russian Federation

The Russian Government has amended the law governing minimum charter capital for new banks and minimum new worth (capital) for existing banks and other credit organisations. Banks failing to meet the new requirements as they enter into force will have their banking licences revoked.

On 28 February 2009 the President signed Federal Law No. 28-FZ amending the Federal Law "On Banks and Banking Activities". The Law came into force on 15 March 2009.

The Law sets out:

The minimum charter capital for newly-established banks.
The minimum net worth (capital) for existing banks and non-banking credit organisations seeking to become banks in rubles in the amount of RUB180 million (which is equal to the previous minimum of EUR5 million at the rate of RUB36 per euro).

Further, it increases the minimum net (worth) capital for banks applying for a general banking license to RUB900 million (which is equal to EUR25 million as opposed to EUR5 million previously).

The Law also requires the gradual increase of the net worth (capital) by banks that had a net worth (capital) of less than EUR5 million as of 1 January 2007 (such banks were allowed to continue their banking activities provided their net worth (capital) reached at that date would not further decrease). Their net worth (capital) must be at least:

RUB90 million as of 1 January 2010.
RUB180 million as of 1 January 2012.

Failure to comply with this requirement will result in revocation of the bank's banking licence.

Small banks must increase their charter capital or withdraw from the banking market | Practical Law