Russian Parliament Backs Foreign Bank Branch Plan Amid Sanctions

Russian lawmakers have preliminarily approved a bill allowing foreign banks to open branches in the country. This move aims to solve cross-border settlement issues caused by Western sanctions restricting major Russian banks' access to the SWIFT system. The bill mandates a 1 billion rouble security deposit and limits foreign staff to 50%.

Russian lawmakers gave preliminary approval to proposed legislation on Thursday that would allow foreign banks to open branches in Russia, a step the finance ministry said it hoped would alleviate issues with cross-border settlements.

International settlements have been a problem for Moscow after Western sanctions, imposed over the conflict in Ukraine, blocked major Russian banks' access to the SWIFT global payments system.

"Settlements are the economy's connecting thread," Deputy Finance Minister Alexei Sazanov told lawmakers when presenting the bill, which was passed during its first reading in the State Duma, the lower house of parliament.

To become law, the bill must pass through two further readings in the Duma, win approval in the upper house of parliament, and be signed by President Vladimir Putin.

Sazanov emphasized the importance of settlements for economic functioning, saying, "Without settlements, the functioning of the economy is not possible."

The new mechanism allows cross-border settlements to happen by permitting foreign banks to open branches in Russia. Currently, foreign banks can only open subsidiaries or representative offices, not branches.

The bill specifies a security deposit of 1 billion roubles for foreign banks and caps foreign staff at 50%. They would also be banned from opening accounts for individuals. "The main goal we are pursuing with this bill is to simplify settlements, the possibility of making settlements through branches," Sazanov said.

(With inputs from agencies.)