Russian Federation: New Banking Amendment Could "Privatize" Payments System

A draft amendment to the Federal Law "On Banks and Banking Activities" that allows companies other than credit institutions to accept payments that usually fall under banks’ jurisdiction (the "Payments Amendment") passed its third reading by the State Duma on July 7, 2006. The Payments Amendment will allow companies other than credit institutions to collect money for rent and communal and telecommunications services, and also specifies that the payer has completed his or her payment obligation once the relevant payment is made to the collector (as opposed to once the money is transferred from the collector to the relevant payee).

The Payments Amendment was initially received very negatively by banking associations, who argued that it will weaken centralized banks at the regional level and will lower the standard of banking operations in general. Anatoly Aksakov, deputy head of the Duma Committee for Credit Organizations and Financial Markets, argues however, that the Payments Amendments will increase the effectiveness and proficiency of work executed by credit organizations and that the acceptance of this law will form a basis for the development and strengthening of competition in banking services in regional markets. The Payments Amendment, he claims, will raise the level of customer service for the population, will allow banks to substantially increase the depth and spectrum of banking services on offer, and will decrease the cost burden of these particular banking operations for established banks and their clients.¹

The acceptance of payments by non-credit institutions is nothing new — the Payments Amendment essentially legalizes and regulates what is already common practice in many places. Once the practice is established by law, more options are expected to be available to consumers, who will also be better protected.

Footnote

^{1 As quoted at www.Regions.ru}

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