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Legal Status and Functions of the Bank of Russia

The Constitution of the Russian Federation, Article 75

Federal Law on the Central Bank of the Russian Federation (Bank of Russia)

Legal Status

Article 75 of the Constitution of the Russian Federation establishes a special legal status of the Bank of Russia, gives it the exclusive right to issue currency (Part 1) and protect the ruble and ensure its stability, which is the main function of the Bank of Russia (Part 2). The status, purposes, functions and powers of the Bank of Russia are also spelled out in Federal Law No. 86-FZ, dated July 10, 2002, ‘On the Central Bank of the Russian Federation (Bank of Russia)’ (hereinafter referred to as the Bank of Russia Law), and other federal laws.

According to Article 3 of the Bank of Russia Law, the purposes of the Bank of Russia are to protect the ruble and ensure its stability, promote the development and strengthen the Russian banking system and ensure the efficient and uninterrupted functioning of the payment system.

A key element of the legal status of the Bank of Russia is its independence, which implies, above all, that the Bank of Russia is a special public and legal institution that has the exclusive right to issue currency and organise its circulation. The Bank of Russia is not a body of state power, but its powers are, in effect, the functions of a body of state power, because their implementation implies the use of state compulsion. The Bank of Russia performs the functions and exercises the powers stipulated by the Constitution of the Russian Federation and the Bank of Russia Law independently from the federal bodies of state power, regional authorities and local governments. Its independent status is codified in Article 75 of the Constitution of the Russian Federation and Article 1 and Article 2 of the Bank of Russia Law.

The legislative powers of the Bank of Russia imply its exclusive right to issue regulations binding on the federal bodies of state power, regional authorities, local governments and all legal entities and natural persons on matters placed within its competence by the Bank of Russia Law and other federal laws. The Constitution of the Russian Federation does not give the Bank of Russia the power to initiate legislation, but it is involved in the law-making process not only by virtue of issuing its own regulations, but also owing to the fact that the drafts of federal laws and statutory acts of federal bodies of executive power concerning the performance by the Bank of Russia of its functions must be submitted to the Bank of Russia for consideration and approval.

The Bank of Russia is a legal entity. Its authorised capital and other property are federal property. Nevertheless, the Bank of Russia has both proprietary and financial independence. It exercises its powers to own, use and manage its property, including international reserves, in compliance with the purposes and according to the procedure established by the Bank of Russia Law. Bank of Russia property may not be seized or encumbered without its consent, unless the federal law stipulates otherwise. The financial independence of the Bank of Russia implies that it covers its expenses from its own incomes. The Bank of Russia may defend its interests in court, including international courts, the courts of foreign states and courts of arbitration.

The state is not liable for the Bank of Russia obligations, just as the Bank of Russia is not liable for the state obligations, unless they have assumed such obligations or unless federal laws stipulate otherwise. The Bank of Russia is not liable for the obligations of credit institutions, while the credit institutions are not liable for the obligations of the Bank of Russia, except the cases in which the Bank of Russia or credit institutions assume such obligations.

The Bank of Russia is accountable to the State Duma of the Federal Assembly of the Russian Federation (hereinafter referred to as the State Duma), which appoints and dismisses the Bank of Russia Chairman (on the proposal of the President of the Russian Federation) and members of the Bank of Russia Board of Directors (on the proposal of the Bank of Russia Chairman, agreed with the President of the Russian Federation), sends and recalls its representatives in the National Banking Board within its quota and considers the guidelines for the single state monetary policy and Bank of Russia annual report and takes decisions on them. On the proposal of the National Banking Board, the State Duma may take the decision to get the Audit Chamber of the Russian Federation to audit the financial and economic activities of the Bank of Russia and its divisions and establishments. In addition, the State Duma holds parliamentary hearings on the Bank of Russia activities with the participation of its representatives and hears the reports by the Bank of Russia Chairman about the Bank of Russia activities in the course of presenting the annual report and guidelines for the single state monetary policy.

Bank of Russia Functions

The Bank of Russia performs its functions in compliance with the Constitution of the Russian Federation, Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’ (hereinafter referred to as the Bank of Russia Law) and other federal laws. According to Article 75 of the Constitution of the Russian Federation, the principal function of the Bank of Russia is to protect the ruble and ensure its stability. The Bank of Russia is the sole issuer of currency. Pursuant to Article 4 of the Bank of Russia Law, the Bank of Russia performs the following functions:

— in collaboration with the federal government it elaborates and implements a single state monetary policy;

— it is the sole issuer of cash and organiser of cash circulation;

— it approves the graphic designation of the ruble as a sign;

— it is the creditor of last resort for credit institutions and it organises the credit institution refinance system;

— it sets the settlement rules in the Russian Federation;

— it sets the rules for conducting banking operations.

— it services budget accounts on all levels of the Russian budget system, unless the federal laws stipulate otherwise, by effecting settlements at the instruction of the authorised bodies of executive power and government extra-budgetary funds, which are assigned the task of organising the execution of and executing the budgets;

— it efficiently manages the Bank of Russia international reserves;

— it takes the decision on the state registration of credit institutions, issues banking licences to credit institutions and suspends and revokes them;

— it supervises the activities of credit institutions and banking groups;

— it registers securities issues by credit institutions in compliance with federal laws;

— it conducts independently or at the instruction of the Russian Government all types of banking operations and other transactions necessary for the performance of Bank of Russia functions;

— it organises and exercises foreign exchange regulation and control pursuant to federal legislation;

— it sets the procedure for effecting settlements with international organisations, foreign states and legal entities and natural persons;

— it sets accounting and reporting rules for the Russian banking system;

— it sets and publishes official exchange rates of foreign currencies against the ruble;

— it takes part in the compiling of Russia’s balance of payments forecast and organises the compiling of Russia’s balance of payments;

— it sets the procedure for and conditions of foreign exchange purchases and sales by currency exchanges and issues, suspends and revokes permits for the currency exchanges to organise foreign exchange purchases and sales (the Bank of Russia will issue, suspend and revoke permits for the currency exchanges to organise foreign exchange purchases and sales as of the day of the coming into force of the corresponding amendments to the Federal Law on the Licensing of Individual Types of Activities);

— it analyses and makes forecasts for the situation in the Russian economy as a whole and by region, especially the monetary, financial and price relations, and publishes the corresponding materials and statistical data;

— it pays compensation for household deposits with bankrupt banks uncovered by the compulsory deposit insurance system in the cases and according to the procedure established by the federal law;

— it is the depository of the International Monetary Fund in the Russian currency and it conducts operations and transactions provided by the Articles of Agreement of the International Monetary Fund and the agreements with the International Monetary Fund;

— it performs other functions in compliance with federal laws.

Last updated on March 28, 2011.