Russian banks gain FX foothold, as PSB-Forex gets Forex dealer license
The Bank of Russia today issued a Forex dealer license to Promsvyazbank’s PSB-Forex.
Today, the Central Bank of Russia announced that it had issued a Forex dealer license to PSB-Forex, a Promsvyazbank company. The move is seen to strengthen the presence of Russian banks in the FX market, as, thus far, only Promsvyazbank and VTB have their FX dealer subsidiaries licensed by the Bank of Russia.
The issue of FX dealer license to PSB-Forex takes the total number of companies allowed by Russian authorities to offer OTC FX services to Russian residents to eight.
The number is rather humble and this can be attributed to a great degree to the bureaucracy accompanying the Russian Forex law, which was signed by president Vladimir Putin in the end of 2014. It suffices to say that the licensed FX brokers (also known as Forex dealers, as per their official Russian designation) are still not allowed to officially commence operations in Russia, because they await a document on the standards for the industry. This document, however, has yet to be published. Hence, the apparent stalling of the industry.
Next, of course, we should note the requirements regarding Forex companies wishing to obtain FX dealer licenses in Russia. The minimum capital requirement of RUB 100 million (USD 1.76m/EUR 1.65m) is putting off many market participants. The leverage restrictions – the leverage cap is set at 1:50 by the law, have also been subject to criticism. On top of that, there are requirements for numerous reports and regulatory filings.
The clumsy development of the regulated FX industry in Russia makes us question the need for the introduction of the FX law. Amid the reasons for implementing such a legislative piece back in the days was the need to improve the credibility of the Forex sector in Russia. However, most FX brokers have continued to target Russian clients from overseas jurisdictions – thus, the scams have also continued to proliferate. In February this year, FinanceFeeds reported of the Bank of Russia’s plans to tackle such overseas fraud by introducing requirements towards the Russian websites of foreign companies. How (and whether) these measures will be implemented remains unclear.