President Vladimir Putin has signed a law permitting foreign banks to open up to one branch in Russia, effective September 1, 2024. The official document has been published on the portal for legal acts.
According to Artem Deyev, head of the analytical department at AMarkets, the entry of a major player into the market typically boosts competition. This often results in lower prices, improved quality of goods and services, and the introduction of new offerings.
“A new branch has the potential to attract fresh clients, which can boost market demand,” the expert explains. “It can also stimulate regional economic growth by drawing in investments and generating new job opportunities. Additionally, the arrival of a major player may alter the market structure, leading to a redistribution of market shares among existing competitors.”
Alexander Shneiderman, head of sales and client support at Alfa-Forex, clarified the distinction between branches and subsidiaries of foreign banks previously established in Russia.
A subsidiary operates as an independent entity with its own authorized capital. In contrast, a branch does not have separate authorized capital and is directly overseen by the head office, the expert noted.
“However, this law imposes many restrictions on the bank’s operations. While it must meet the fundamental needs of the Russian banking system, including international transactions, its profitability is expected to be limited, according to the rationale behind the new regulations,” the expert explained.