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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)

Federal Law on banks and banking activities

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)’, and other federal laws.

According to Article 3 of the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’, the goals of the Bank of Russia are to protect the ruble and ensure its stability, promote the development and strengthen the Russian banking system, ensure the stability and development of the national payment system, develop the financial market of the Russian Federation and ensure its stability.

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 Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’ 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 Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’.

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 private individuals on matters placed within its competence by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’ and other federal laws. According to Article 104 of the Constitution of the Russian Federation, the Bank of Russia does not have 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 Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’. 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 and non-credit financial institutions, while the credit institutions and non-credit financial institutions are not liable for the obligations of the Bank of Russia, except the cases in which the Bank of Russia or credit institutions and non-credit financial 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 Governor (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 Governor, agreed with the President of the Russian Federation), sends and recalls its representatives in the National Financial 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 Financial 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 Governor 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)’ 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 Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’, the Bank of Russia performs the following functions:

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

— in collaboration with the federal government it elaborates and implements the policy towards developing the financial market of the Russian Federation and ensuring its stability;

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

— it approves the graphic symbol 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 exercises supervision and oversight of the national payment system;

— it sets the rules for conducting banking operations;

— it services budget accounts of 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 takes decisions on the state registration of non-governmental pension funds;

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

— it exercises regulation, control and supervision over the activities of non-credit financial institutions in compliance with federal laws;

— it registers securities issues and prospectuses and registers reports on the results of securities issues;

— it exercises control and supervision over the compliance by issuers with the requirements of federal legislation on joint-stock companies and securities;

— it exercises regulation, control and supervision over corporate governance in joint-stock companies;

— 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 foreign exchange control pursuant to federal legislation;

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

— it approves industry accounting standards for credit institutions, the Bank of Russia, and non-credit financial institutions, the chart of accounts for credit institutions and the procedure for its application, the chart of accounts for the Bank of Russia and the procedure for its application;

— 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 takes part in the development of the methodology for compiling Russia’s financial account within the national account system and organises the compiling of Russia’s financial account;

— it keeps official statistical records of direct investments to and from Russia in compliance with federal legislation;

— it establishes independently the statistical methodology of direct investments to and from Russia, the list of respondents, approves the procedure for their submitting of primary statistical data on direct investments, including the methods of federal statistical review;

— it analyses and makes forecasts for the situation in the Russian economy 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 IMF funds 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 exercises control over the compliance with the requirements of federal legislation on countering the illegal use of insider information and market manipulation;

— it protects the rights and legitimate interests of shareholders and investors in the financial markets, insurers, insured persons, and beneficiaries recognised as such in accordance with the insurance legislation, and also insured persons in the system of compulsory pension insurance, depositors and participants of a non-governmental pension fund in the system of non-governmental pension insurance;

— it performs other functions in compliance with federal laws.

Last updated on July 8, 2014.