The RF Central Bank (the "CBR") recently has announced that the requirement to hold special transaction accounts and non-interest reserves for certain transactions will be lifted on July 1, 2006, as opposed to the original deadline of January 1, 2007.
The restrictions were introduced by the CBR in accordance with RF Law No. 173-FZ "On Currency Regulation and Currency Control", dated December 10, 2003 (the "Currency Control Law")1, which regulates convertible currency transactions between residents and non-residents. In accordance with the restrictions, borrowers must use a "special account" for, e.g., loans with a pay-back period of three years or less, and are required to deposit 1% of the amount of such loans in an interest-free account with a Russian bank before the loan can be disbursed.
The announcement came on May 30, 2006, just less than three weeks after RF President Vladimir Putin proposed the initiative in his annual address before the Federal Assembly. This is yet another positive step forward in encouraging financing in the RF and moving towards full convertibility of the Russian ruble. It also follows the decision by the CBR on March 29, 2006, which became effective in May, to eliminate the mandatory conversion of hard currency proceeds into rubles. Previously, companies were required to convert 10% of their export proceeds into rubles. Over the last few years, the requirement had dropped from 50% of such proceeds. /D. Gubarev
Footnote
1 For more on the RF Currency Control Law, please see E. Abrossimova, K. Konstantinov and O. Titenko. "New Currency Control Law Liberalizes Currency Transactions." CIS and Central Europe Legal Newswire . February 12, 2004; and A. Kelina. "Liability for Currency Law Violations Toughened." CIS & Central Europe Legal Newswire. December 7, 2004.
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