The Central Bank of the Russian Federation May Be Vested With the Authority to Determine the Foreign Currencies that May Be Used to Pay for the Authorized Capital of Financial Organizations

On June 21, 2024, Bill No. 653124-8 "On Amending Certain Legislative Acts of the Russian Federation" (hereinafter - "Bill No. 653124-8") was submitted to the State Duma of the Russian Federation, providing for changes in the procedure for payment for the authorized capital of credit organizations, insurance organizations and non-state pension funds (hereinafter - "financial organizations").

The subject of the legislative initiative was a group of senators and deputies headed by Anatoly Aksakov, Chairman of the State Duma Committee on Financial Market.

Bill No. 653124-8 is aimed at increasing the investment attractiveness of the Russian financial market for residents from friendly countries and expanding opportunities to counter foreign restrictive measures1. To this end, it is proposed to grant the Board of Directors of the Central Bank of the Russian Federation the right to annually establish a list of foreign currencies that may be used to pay for the authorized capital of financial organizations. The exemplary list specified in the Bill under consideration includes currencies of friendly countries: EAEU (Armenia, Kyrgyz Republic, Republic of Kazakhstan, Republic of Belarus) and BRICS, including the Chinese yuan and Indian rupee. A specific list of currencies used to pay for the authorized capital of financial organizations must be published annually by the Central Bank of the Russian Federation not later than February 15 of each year.

It should be noted that the possibility of paying for the authorized capitals of certain financial organizations in foreign currencies is not new to Russian law. For example, earlier, in 2016, the Instruction of the Central Bank (N3982-U)2 approved a closed list of foreign currencies, the contribution of which is allowed in the authorized capitals of credit organizations: the currency of Australia, Great Britain, Ireland, Denmark and other states. However, Bill No. 653124-8 proposes to expand both the list of foreign currencies that are allowed to be used to pay for the authorized capital of financial organizations and the list of financial organizations subject to the regulation in question. In particular, the changes affect insurance organizations, for which it is proposed to exclude the requirement to pay for shares in the authorized capital exclusively in rubles.

A separate purpose of the Bill is also to prevent the formation of authorized capitals of Russian credit organizations at the expense of currencies of the states that imposed restrictive measures against the Russian Federation, in particular, the dollar and the euro. For this purpose, the Board of Directors of the Central Bank of the Russian Federation is granted the right to fully or partially restrict contributions to the authorized capitals of financial organizations in the currencies of unfriendly states.

Thus, adopting of Bill No. 653124-8 may significantly simplify the procedure for investing in Russian financial organizations for financial partners from friendly countries. However, it is difficult to assess the real economic effect of the adoption of this Bill until cross-border settlements for payment of authorized capitals in currencies of friendly countries begin.

At present, Bill No. 653124-8 is being considered by the specialized committee of the State Duma of the Russian Federation on the financial market.

1 Explanatory Note to Bill No. 653124-8 "On Amending Certain Legislative Acts of the Russian Federation"
2 Decree of the Bank of Russia dated 21.03.2016 N 3982-U "On Amendments to Clauses 4.3 and 17.7 of the Instruction of the Bank of Russia dated April 2, 2010 N 135-I "On the Procedure of Decision-Making by the Bank of Russia on State Registration of Credit Institutions and Issuance of Licenses for Banking Operations" (Registered with the Ministry of Justice of Russia on 13.04.2016 N 41783)