Russia: Ring fence on investment is breached

Amendments to banking legislation that will abolish the requirement for foreign investors to obtain permission from the central bank before buying equity in Russian banks passed their first reading in the Duma (parliament) at the end of November.

According to the amendments, both residents and non-residents will have to inform the central bank once they have acquired more than a 1% stake in a Russian bank, and must obtain permission if they want to amass more than 10%.

According to research from Deutsche UFG analysts Alexey Zabotkin and Dmitry Dmitriev: “The amendments eliminate the ‘soft ringfence’ which constrains the investor base for Russian banking shares, in particular Sberbank.”

The decision to relax the rules stems partly from Russian commitments that are part of the World Trade Organization accession process.

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