Column by the head of the department for work with financial institutions B1 Gennady Shinin about branches of foreign banks

We live in an era of transformation of the geopolitical structure of the world into a more stable, I would like to believe, multipolarity. Russia will undoubtedly be one of the most important economic and political centers of the new multipolar world order. Even now, in the ongoing acute phase of transformation and under the incessant pressure of sanctions pressure and threats, the Russian Federation is developing economic relations with a large number of friendly countries.

The infrastructure serving the interests of participants in international cooperation is the circulatory system of the economy of a multipolar world. Branches of foreign banks from friendly countries in Russia will certainly become an element of such infrastructure in the future.

Preparing a legislative framework that will make it possible for foreign banks to open branches is an early and strategic step in the emerging new economic realities. Of course, it would be a mistake to expect that as soon as the law is passed, a line of foreign bankers will line up to join us. But someone will probably be the first. It is very likely that the pioneers will act in the context of the implementation of political agreements at the highest level. The slightly open door will create a path into the Russian economic space for other players who may become more active after the end of the most acute phase of the geopolitical conflict.

Russia is actively increasing the volume of foreign trade transactions with friendly countries, domestic producers are building economic ties with new suppliers, and many foreign companies are looking for opportunities to enter the market and replace competitors. It can be assumed that the real key focus in the activities of foreign branches will be servicing participants in foreign trade activities and conducting settlements in national currencies. And it will be a little more comfortable for foreign partners to invest in Russia, relying on their own financial infrastructure.

For individuals, transfers without opening bank accounts can become a very popular service, both for labor migrants and for Russian citizens. For now, this is actually the only service that, according to the bill, will be available to individuals. In general, foreign branches will be cut off from the retail market. That is why foreign branches will not be able to create serious competitive risks and threats to the existing banking system, remaining completely complementary to its settlement functions.

Of course, the limited functionality of branches will not allow them to be considered full-fledged financial institutions influencing the landscape of the Russian banking system. And there are many skeptics who, at this stage, do not believe in the significant practical effect of the adoption of legislation, appealing to threats of sanctions.

At the same time, this will be, in a sense, a historical event, because the first discussions about the feasibility of opening branches of foreign banks in Russia took place more than 20 years ago during the negotiation process within the framework of the country’s accession to the World Trade Organization. I would still suggest assessing the success and effectiveness of legislation, as well as its practical implementation, over a longer historical horizon and in the context of the need for Russia and its partners to form new economic unions.

Gennady Shinin, head of department for work with financial institutions B1