Russian Legislation Update: September – December 2017 | White & Case LLP International Law Firm, Global Law Practice
Russian Legislation Update: September – December 2017

Russian Legislation Update: September – December 2017

Welcome to the most recent issue of our Russian Legislation Update, covering the period of September – December 2017.

In this issue:

  • Civil Law
  • Banking
  • Currency Control
  • Corporate
  • Mass Media / Foreign Agents

 

Civil Law

Mortgage

On 25 November 2017 the President signed Federal Law No. 328-FZ amending the Mortgage Law and some other laws.

The amendments provide the possibility for mortgage bonds to be issued in electronic form. It is expected that this will decrease expenses for parties to a mortgage deal. Rights under the electronic mortgage bond will be fixed in the form of an electronic document kept with a depositary. The mortgage bond will need to be certified by the enhanced electronic signatures of the mortgageholder, mortgagor and the debtor (or, in some cases, only by the enhanced electronic signature of the mortgageholder or the notary).

The amendments also expressly allow the realization of mortgaged property by way of direct sale by the mortgageholder (without an auction) in the course of extra-judicial or so called "mixed" enforcement. Some other changes have been made by analogy with the Civil Code provisions on pledges (regarding the possibility of extra-judicial enforcement of housing mortgages, the effect of changes to the preceding mortgage on subsequent mortgages, and the possibility of extra-judicial enforcement if there are several mortgageholders).

The amendments entered into force on 15 November 2017, save for certain provisions (mostly regarding electronic mortgage bonds) which will enter into force on 1 July 2018.

 

Banking

Banking licenses

On 11 August 2017 the Central Bank issued Directive No. 4487-U amending Instruction No. 135-I.

The Directive was registered with the Ministry of Justice on 31 October 2017.

On 1 January 2017 the legal changes came into effect that introduced two types of banks: banks with a "universal" license; and banks with a "basic" license. The Directive describes various sub-types of universal and basic licenses that differ in terms of allowed banking operations. It also stresses that banks with a basic license must comply with the restrictions established by the Law on Banks (i.e. the restrictions on dealing with foreign counterparties, etc.). Those restrictions will not be specified in the license.

The Directive entered into force on 14 November 2017.

Mandatory economic ratios

On 8 September 2017 the Central Bank issued Directive No. 4521-U amending Instruction No. 180-I "On Mandatory Economic Ratios for Banks."

The Directive was registered with the Ministry of Justice on 30 November 2017.

The Directive amends the formula for calculating capital adequacy ratios by adding a new indicator: a credit exposure for investments in funds (i.e. investments in shares or units of investment funds, non-state pension funds and foreign funds).

The Directive entered into force on 16 December 2017.

On 17 October 2017 the Central Bank issued Directive No. 4581-U amending Directive No. 4203-U "On Signs of a Potential Relation of a Person (Persons) with a Credit Organization."

The Directive was registered with the Ministry of Justice on 2 November 2017.

As of 1 January 2017, a new mandatory ratio (N25) applies: the maximum permitted exposure to related parties (group of related parties) of a bank may not exceed 20 percent of a bank's capital.

The Directive expands the list of signs that a person is potentially a related party of the bank by adding cases where third parties that control or significantly influence a bank own more than 5 percent of the person's voting shares (participation interests).

The Directive entered into force on 25 November 2017.

Mandatory reserves

On 13 November 2017 the Central Bank issued Directive No. 4604-U regarding mandatory reserves.

The Directive establishes the mandatory reserve ratios for banks with a universal license and banks with a basic license. Banks with a universal license must comply with the previous mandatory reserve ratios, whereas banks with a basic license must comply with lower ratios with respect to banks' ruble liabilities to individuals and "other" ruble liabilities – 1 percent (as opposed to 5 percent for banks with a universal license).

The Directive entered into force on 1 December 2017 and replaced Directive No. 4253-U.

Disclosure of information

On 7 August 2017 the Central Bank issued Directive No. 4482-U "On the Form and Procedure of Disclosure by Banks (Parent Banks of Banking Groups) of Information on Incurred Risks, Procedures for Assessment of Risks, Management of Risks and Capital."

The Directive was registered with the Ministry of Justice on 1 November 2017.

Banks (parent banks of banking groups), save for banks with a basic license, are obliged to disclose information on their procedures for the management of risks and capital. The information is to be disclosed in accordance with the requirements of the Directive (in particular, it must contain a comparison of the data from annual accounting (financial) statements and the data from the statements submitted to the Central Bank for supervision purposes) and the relevant internal regulation. The disclosed information must be presented in a form which is clear to a wide audience.

The information must be disclosed on an annual, semi-annual and quarterly basis.

(The updated terms and rules for the disclosure of the information by parent banks of banking groups are set by Directive No. 4481-U of 7 August 2017, which will become effective on 1 January 2018).

The Directive will enter into force on 1 January 2018.

On 31 August 2017 the Central Bank issued Directive No. 4515-U "On the Scope and Procedure for the Disclosure by the Central Bank of Information Contained in the Reporting Forms of Banks (Banking Groups)."

The Directive was registered with the Ministry of Justice on 25 September 2017.

The Directive provides for mandatory disclosure on the Central Bank's website (www.cbr.ru) of certain information contained in banks' reporting forms (turnover balance sheet, calculation of net worth (capital), data on mandatory economic ratios, annual (interim) accounting (financial) statements, etc.)

The Directive entered into force on 9 October 2017.

Payment system of the CBR

On 6 July 2017 the Central Bank approved Regulation No. 595-P "On the Payment System of the Central Bank."

The Regulation was registered with the Ministry of Justice on 6 October 2017.

The Regulation will replace Regulations Nos. 384-P and 303-P on the same matters. The Regulation provides for, among other things, a unified extended schedule for the whole country (from 1 am to 9 pm Moscow time), a number of liquidity management tools (e.g. the creation of liquidity pools for banks with numerous branches), and financial markets participants' indirect participation in the payment system.

The Regulation will enter into force on 2 July 2018.

 

Currency Control

On 14 November 2017 the President signed Federal Law No. 325-FZ amending the Currency Control Law and the Administrative Offences Code.

According to the amendments, for the purposes of compliance with a so called "repatriation" requirement foreign trade contracts between residents and non-residents must specify the terms for the performance of obligations by the parties. Respectively, residents are also required to provide banks with the following information based on the foreign trade contracts: 1) the terms for the receipt from non-residents of funds for the goods (works, services) supplied to them; and 2) the terms for the performance by non-residents of their obligations to supply goods (works, services) to residents on account of the residents' advance payments and the terms for the return of the advance.

The amendments also expand the list of grounds for the banks' refusal to process a currency operation. Banks will refuse to process a currency operation if it will breach the currency rules (e.g. those on currency operations between residents, residents' overseas bank accounts and residents' rights and obligations related to currency operations).

The amendments also introduce administrative liability for company officials (including chief executives). For companies' engaging in illegal currency operations or breaching the repatriation requirement – a fine of RUB 20,000 - 30,000, and in case of a repeated violation – disqualification for a period of between six months to three years.

The Law will enter into force on 14 May 2018.

On 26 September 2017 the Government adopted Resolution No. 1160 on the rules for providing information and documents to currency control bodies.

According to the Resolution, banks and securities market participants must provide currency control bodies (i.e. tax and customs authorities) with available documents and information relating to currency operations upon request. The request shall specify a suspected currency violation. The term for the fulfillment of the request shall be no less than 7 business days.

The Resolution also envisages the exchange of documents and information (including those relating to currency violations) between the tax and customs bodies.

The Resolution entered into force on 6 October 2017.

On 16 August 2017 the Central Bank issued Instruction No. 181-I "On the Procedure for Submission by Residents and Non-Residents to Authorized Banks of Confirming Documents and Information Related to Currency Operations [...]."

The Instruction was registered with the Ministry of Justice on 31 October 2017.

Instruction No. 181-I will replace Instruction No. 138-I. The new Instruction moves the currency control burden from residents to authorized Russian banks.

The requirement to file a transaction passport has been replaced with the requirement to register an agreement with a bank if the agreement is worth: 1) if it is an import contract or a loan agreement – RUB 3 million or more, 2) if it is an export contract – RUB 6 million or more.

To register an agreement, a resident is required to provide a bank with the agreement itself (or a relevant extract from it) and some other data that is necessary for the bank to complete a banking control sheet. In the case of exports, a resident is allowed to provide only general information on the export contract first (the contract itself is to be provided no later than 15 business days after its registration). The agreement is to be registered within one business day.

The requirement for residents to provide currency certificates has also been abolished. When foreign currency funds are credited to or debited from the resident's bank account, the bank is to determine the currency operation code on its own based on the documents related to the operation provided by the resident. At the same time, the resident is entitled to instruct the bank to debit its transit foreign currency account before it provides such documents to the bank, on the condition that it provides information on the currency operation code.

The requirement for residents to provide documents related to a currency operation does not apply where foreign currency funds are credited/debited based on an agreement with a non-resident which is worth no more than RUB 200,000.

The Instruction (as amended by Directive No. 4629-U of 29 November 2017) will enter into force on 1 March 2018.

 

Corporate

On 30 October 2017 the President signed Federal Law No. 312-FZ amending the Law on the State Registration of Legal Entities.

According to the Law, irrespective of the way in which documents were submitted for state registration, an applicant will receive state registration documents or a decision on the suspension or refusal of state registration in electronic form. Upon request, the applicant will also receive documents in paper form. In addition, the Federal Tax Service will publish information on state registration or the suspension or refusal of state registration on its website (www.nalog.ru).

In addition, any person will be entitled to place on that website its request to be notified if the documents with respect to a specified company are submitted to the registration body after the request is so placed.

The described amendments will enter into force on 29 April and 1 October 2018, respectively.

 

Mass Media – Foreign Agents

On 25 November 2017 the President signed Federal Law No. 327-FZ amending the Mass Media Law and the Information Technologies Law.

According to the amendments, a foreign mass medium can be recognized as acting as a foreign agent if its financing comes from foreign sources (the NGO Law imposes additional reporting requirements on foreign agents and provides for the additional grounds for their unscheduled inspections).

Information on the relevant foreign mass media was published on the website of the Ministry of Justice (here).

The Law entered into force on 25 November 2017.

 

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