Who Controls the Currency?

According to Russian currency control legislation, residents are generally not allowed to buy or sell goods or services in any other currency than the Ruble. Transactions between a Russian resident and a non-Russian resident may be done in any world currency, as long as Russian currency control legislation is followed. When a Russian and a non-Russian are involved in a transaction, the parties must familiarize themselves with the rules relating to using foreign bank accounts, and rules concerning repatriation and reporting requirements when transacting under foreign trade contracts.

Today, currency is controlled by the Federal Tax Service and the Federal Customs Service (from 2004-2016 it was in the hands of Rosfinnandzor – the Federal Service for Financial and Budgetary Supervision, before Rosfinnandzor’s abolition). Since the new bodies too control, Russian currency control legislation has seen many important changes and foreseeably many more to come.

The year 2016 was a tumultuous year when it came to Ruble to US Dollar and Euro exchange rates (see Central Bank of Russia (CBR) website). Note that exchange rates are regulated by the CBR and not by Russian law, and influenced solely by economics and politics.

The role of the CBR

The Central Bank of Russia, known to most of us as the CBR, is the sole body in charge of ensuring the Ruble’s, Russia’s national currency’s stability. The CBR has several tasks, including:

• ensuring that the Ruble is protected and remains stable
• monetary policy
• issue money and control currency turnover
• official exchange rates
• act as lender when nobody else can, as well as organize refinancing for credit institutions
• establish settlement rules and regulations for banking operations
• oversee and set rules for the national payment system
• control government budget accounts and the CBR’s international reserves
• supervise and register financial organizations

The Banking Sector

The Russian banking sector has seen a positive overall growth trend in the recent years and continues to do so. In 2016, it saw a four-fold year-on-year increase. Both loans and improved quality of loans increased in 2016. In November 2016, 643 credit organizations operated in Russia (594 banks and 49 non-banking credit organizations), a decrease in total credit organizations from January 2015.

The country’s greatest assets are Sberbank, VTB, Gazprombank and Russian Agricultural Bank – Russia’s greatest banks.

Insurance

By the end of 2016, Russia had 388 subjects of insurance activities, 263 registered insurance companies and 12 mutual insurance societies.

Almost all major segments of the Russian insurance market grew in the collection of premiums during the second quarter of 2016. All except comprehensive coverage auto insurance (known in Russian as CASCO), anyway. The decrease in CASCO was of course due to the downshift in demand for new cars and the slightly decreased income and creditworthiness of the consumers. The year on year decline in premium collection was RUB 43,2 billion, or a 8,4 % decline as compared to the same quarter in 2015.

The highest growth in the insurance sector has and remains to be life insurance and compulsory motor third-party liability insurance (CMTPL, or OSAGO as it is known in Russian). Life insurances grew by 58,1 % in the second quarter of 2016, equaling RUB 47,4 billion in premiums.

In contrast to a decline earlier in 2016 and in 2015, insurance services and contracts grew in demand in the second quarter of 2016, greatly as a result of increased private property transactions. Individual insurance policies taken out increased by 9,2% year on year, and insurance policies issues to legal entities and sole proprietors declined by 19,7% in 2016.

MOEX – the investor’s platform

The Russian securities market is dominated by the Moscow Exchange (MOEX). It is an investors’ platform for trading in equities, bonds, derivatives and currencies, both domestically and internationally. Russian companies can issue shares and bonds and offer them for sale in public placements.

In February 2013, two years after the Moscow Interbank Currency Exchange (MICEX) and the Russian Trading System (RTS) merged, MOEX held an IPO.

Halting anti-money laundering (AML)

Since 2001, President Putin has worked hard and efficiently on anti-money laundering (AML) with the aim to bring it on par with Western standards. Russia is a member of the International Financial Action Task Force (FATF) since 2003, and of the Eurasian Group on Combatting Money Laundering and Terrorist Financing (EAG) since 2004. The EAG’s includes many CIS countries, China and India.

Common Reporting Standard (CRS)

In 2016, Russia agreed to the OECD’s Common Reporting Standard (CRS) by signing the Organisation for Economic Co-operation and Development’s Multilateral Competent Authority Agreement (MCAA). Thus, information exchange will be automated in electronic form starting 2018 covering data from 2017. Simultaneously, Russia enters into exchange and other important relationships, such as bilateral agreements, with other foreign jurisdictions who have committed to the MCAA.

We are expecting significant amendments as well as new bylaws to the current legislation for ensuring smooth processes of this automated passing of information as well as the information gathering process.

Sources:
www.imf.org/external/pubs/ft/scr/2016/cr16303.pdf
www.cbr.ru/eng/