Belarusian Banking and Finance Newsflash - March 2016
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  Kiryl Apanasevich
  Kiryl Apanasevich
Office Managing Partner
  Hanna Volchak
  Hanna Volchak
  Artem Semchik
  Artem Semchik
  Anna Kasko
  Anna Kasko
Legal Assistant
Dear clients and cooperation partners,

We are glad to present our regular annual review of news and events in banking and finance.

By the end of 2015, exports of goods and services rose after a five-month fall, leaving a positive foreign trade balance in goods and services for the year totalling USD 205.7 million according to data from the National Statistics Committee. External sovereign debt decreased by USD 133.9 million or 1.1% since the beginning of 2015, leaving a balance of USD 12.4 billion as of 1 January 2016. During 2015 state gold reserves fell by USD 883.3 million, leaving some USD 4,175.8 million as of 1 January 2016. According to the National Bank the main reasons for the fall in state gold reserves were repayment of internal and external obligations in foreign currency and a decrease in the market value of gold. During the year the national currency was devalued following devaluation of the Russian rouble caused by the decrease in oil prices and imposition of economic sanctions.

In November 2015 a decision was taken on denomination of the Belarusian rouble from 1 July 2016. Banknotes of the 2000 type will be replaced with banknotes and coins of the 2009 type in a ratio of 10,000 to 1 until 31 December 2016. New currency codes will apply to the denominated Belarusian rouble. The letter code will be BYN (BY – the country code according to ISO 3166 and N – the first letter of the word “new”) and the numerical code will be 933.

The OTC foreign exchange market renewed operations in February 2015. The amount of mandatory sale of foreign currency proceeds, which had increased to 50% at the end of 2014, was reduced to 40% in February and to 30% in April.

Although the state’s share in the banking capital of the country was reduced to 75.38% by 1 July 2015, the state still prevails in the Belarusian banking sector. The licences of three Belarusian banks were recalled in 2015, while Delta Bank went bankrupt. The licences of four Belarusian banks were suspended with regard to certain types of banking operation due to failure to comply with the minimum regulatory capital requirements. In these circumstances certain banks chose a way to combine their resources: in particular, the Belarusian Bank for Small Business was reorganised by way of merging with Idea Bank.

As of 1 January 2016 the minimum amount of regulatory capital for banks and non-bank credit and financial institutions (NCFI) is calculated in Belarusian roubles. This comes to BYR 450 billion for banks subject to indexation according to the consumer price index. The adjusted amount will be published on the official website of the National Bank.

The first NCFI in Belarus was registered at the end of November 2015: named INCASS.EXPERT, it will provide cash-collection services to corporate clients and financial institutions.

During the past year, work continued on formation of a financial mega-regulator on the basis of the National Bank: the National Bank took over forfaiting and the Forex market. The National Bank became the regulator in the leasing and microfinancing sphere in 2014 and by 15 March 2016 the corresponding registers of the National Bank contained 100 leasing and 108 microfinancing institutions.

We refer you to the information below on the most important legislative and regulatory changes.



Amendments to the Banking Code

Amendments to the Banking Code introduced by the Law of the Republic of Belarus of 4 June 2015 No. 268-Z entered into force on 7 September 2015. The changes are mostly aimed at clarifying and expanding the powers of the National Bank.

Additionally, changes have been introduced to the concept of an independent bank director. In particular, the list of persons barred from having the status of an independent director of a bank has been significantly expanded. The minimum number of independent directors on the Board of Directors (Supervisory Board) of banks has been increased to two.

The amendments to the Banking Code exclude cheques from the list of payment instruments. At the same time the list of types of non-cash settlement has been supplemented with money transfer.

Since 7 September 2015 credit agreements and bank deposit agreements may be concluded through Remote Banking Systems (RBS). Conclusion of these agreements via RBS will be deemed equal to executing them in written form.

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Changes in taxation of income earned by non-residents from granting credit facilities and loans

Starting from 1 January 2016 the income of foreign companies which do not operate in Belarus via a permanent establishment from syndicated loan agreements is excluded from tax exemptions on income.

At the same time, the amended Tax Code exempts foreign companies’ income derived from loan agreements with non-offshore entities (confirmed in The Bankers Almanac published by Reed Business Information) and accrued in 2016.

Changes have been established by the Law of the Republic of Belarus of 30 December 2015 No. 343-Z.

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Regulation of interest rates on credit facilities

In 2015 the National Bank adopted several measures aimed at regulating interest rates on credit facilities granted by Belarusian banks.

According to Resolution of the Board of the National Bank of 5 May 2015 No. 278 banks must make additional contributions to special reserves in case their annual interest rate on credit facilities exceeds the interest rate on the National Bank’s overnight credit at the moment of concluding an agreement, multiplied by:

  • 1.2 – for credit facilities to legal entities (approx 36% a year);
  • 1.4 – for credit facilities to natural persons (approx 42% a year).

Banks are to form a portfolio of homogeneous credit facilities for each of the groups mentioned. A reserve for potential losses should be formed in the amount of 30% of portfolio size.

The procedure for establishing interest rates on credit facilities granted by banks has been clarified by the National Bank in its Letter of 28 October 2015 No. 04-17/1338. The main principle is to take into account all expenses related to issue and repayment of credit known at the moment of concluding an agreement, including expenses for:

  • considering application and documents for obtaining credit;
  • servicing credit;
  • issuing and servicing bank payment cards on credit transactions;
  • transferring credit to the borrower’s current (settlement) account opened at the bank;
  • granting cash credit;
  • other expenses on additional services if granting credit depends on their use.

When establishing the interest rate, certain expenses do not necessarily have to be taken into account, e.g. payments to third parties (including insurance fees) and payment for execution of a surety agreement (if not over the amount of the fee for notarisation of the agreement).

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Changes in rules for conducting currency transactions

Since 23 May 2015, limitations on the amount of transactions for sale and purchase of foreign currency between banks and clients on the OTC foreign exchange market have been abolished by Resolution of the Board of the National Bank of 21 May 2015 No. 315.

As of 16 September 2015 non-residents can open settlement accounts in Belarusian roubles in Belarusian banks even if they do not have representative offices in Belarus. The amendments were introduced by Resolution of the Board of the National Bank of 26 August 2015 No. 515.

At the same time, the number of cases when settlements between residents can be performed in foreign currency has been reduced. In particular, foreign currency will no longer be used in the following cases:

  • settlements between legal entities that are residents and residents of Free Economic Zones;
  • settlements under particular types of insurance agreement;
  • for legal entities to receive money from natural persons for payment of consular and other fees for processing their documents in diplomatic and other missions of foreign states.

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Bills of exchange may be accepted as payment under export contracts

As of 21 May 2015 Belarusian exporters may accept bills of exchange issued or avalized by non-resident banks as payment under export contracts (Edict of the President of the Republic of Belarus of 17 February 2015 No. 69 On the Use of Bills of Exchange).

A non-resident bank should have at least two of the following ratings assigned by rating agencies:

  • For banks from Russia, Kazakhstan, and Armenia – Long-Term Foreign Currency Rating by Fitch Ratings or Standard&Poor’s not lower than BB or Long-Term Foreign Currency Bank Deposits Rating by Moody’s Investors Service not lower than Ba3.
  • For other foreign banks – the same ratings not lower than BBB and Baa3 accordingly.

Under the new rules, Belarusian exporters may enter into export agreements that provide deferred payments for a term exceeding the term set by legislation for completion of foreign trade transactions. At the same time exporters still have obligations relating to completing foreign trade transactions in due time and mandatory sale of foreign currency. Therefore an exporter may transfer the right to receive payments under a bill of exchange to an organisation discounting bills of exchange (purchasing bills of exchange net of discount on a non-recourse basis).

The following legal entities are entitled to discount bills of exchange on a permanent basis (two or more times within a year) in Belarus: banks, NCFI and legal entities registered in the Register of Legal Entities Discounting Bills of Exchange. The latter must have an authorised fund of not less than EUR 50,000 on the date of discounting a bill of exchange. Two organisations were registered in the Register as of 15 March 2016.

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Taxation of income from deposits by individuals

Since 12 November 2015 all fixed-term and conditional deposit agreements in Belarus are divided into irrevocable and revocable on the basis of the Decree of the President of the Republic of Belarus of 11 November 2015 No. 7 On Attraction of Funds into Deposits.

Furthermore, starting from 1 April 2016 income of individuals in the form of interest on bank accounts, deposits in banks and NCFI located in Belarus are subject to personal income tax (PIT) at the rate of 13% if funds are placed on current (settlement) bank accounts and in deposits for:

  • less than one year for deposits in Belarusian roubles; and
  • less than two years for deposits in foreign currencies.

PIT will be calculated on such agreements only if the interest rate exceeds the interest rate on demand deposits.

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Use of factoring expanded

A number of innovations have been introduced in the legal regulation of factoring in Belarus by the Edict of the President of the Republic of Belarus of 23 November 2015 No. 471 On Issues of Financing against Assignment of Monetary Claims (Factoring). The changes are aimed at developing factoring operations in mutual trade of the member states of the Eurasian Economic Union, promoting exports to third countries as well as removing barriers on these operations in settlements during import. The changes will come into force on 26 May 2016.

The Edict established two possible financing options against assignment of monetary claims:

  • entering into a factoring agreement; and
  • performing factoring operations.

The debtor will be entitled to act as one of the parties to the agreement in the case of entering into a factoring agreement (currently only the creditor can do this). During factoring operations Belarusian banks and NCFI will be entitled to purchase from non-residents monetary claims received under factoring agreements.

Starting from 26 May 2016 import settlements may be carried out by a bank or NCFI in the result of a factoring operation or factoring agreement. In the first case, Belarusian bank or NCFI purchases monetary claims against residents from non-resident factors which acquired such claims under factoring agreements. In the second case, Belarusian bank or NCFI pays to the creditor in accordance with the terms of the factoring agreement.

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Transactions in the Forex market regulated in Belarus

Before 2015 there was no legislation regulating transactions in the Forex market in Belarus. The gap has now been bridged by the Edict of the President of the Republic of Belarus On Activities in the Over the Counter Forex Market of 4 June 2015 No. 231 entering into force. Starting from 7 March 2016 only Forex companies, the National Forex Centre, banks and NCFI may conduct transactions on the OTC Forex market in Belarus.

The Edict sets the requirements to be met by each Forex company established in Belarus. The following requirements are included:

  • minimum authorised fund of BYR 2 billion;
  • registration in the Register of Forex Companies by the National Bank.

Personal income received under agreements on Forex operations with Belarusian Forex companies, banks, or NCFI is exempt from personal income tax until 1 March 2019. The corporate income tax rate for Belarusian Forex companies and the National Forex Centre received from Forex operations will be reduced by 50% within the same timeframe.

Forex companies are entitled to several constant privileges as well (for example, the right to open bank accounts with non-resident banks and bring foreign exchange transactions to those accounts on foreign exchange markets without a permit from the National Bank).

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Interbank identification system to be created in Belarus

An interbank identification system will be launched in Belarus starting from 1 October 2016 in line with the Edict of the President of the Republic of Belarus of 1 December 2015 No. 478 On Development of Digital Banking Technologies. This will allow bank customers who have undergone the identification procedure in one of the banks to obtain banking services via remote channels in any Belarusian bank without personal attendance. The system will be established by NCFI named ERIP which will also collect, process and store clients’ data.

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We are pleased to present the most significant projects in the banking and finance sphere handled by SORAINEN Belarus lawyers last year.

Belarusian Bank for Small Business merges with Idea Bank

SORAINEN Belarus advised Polish financial group Getin Holding on reorganisation of its two member banks by way of merging the Belarusian Bank for Small Business with Idea Bank. Legal services provided by SORAINEN included consultations on regulatory aspects and employment and corporate law issues.

EBRD launches Risk Sharing Facility programme in Belarus

SORAINEN Belarus acted as local counsel for the European Bank for Reconstruction and Development (EBRD) in relation to its Risk Sharing Facility (RSF), a special financing programme designed to share risk in loans provided by Belarusian banks to small and medium-sized companies. During 2015 EBRD engaged Belarusky Narodny Bank and Priorbank in the RSF.

EBRD is an international financial institution that funds projects in over 30 countries from central Europe to central Asia, as well as in the southern and eastern Mediterranean.

IFC extends USD 10 million loan to A-100

SORAINEN Belarus acted as local counsel for the International Finance Corporation (IFC) on the extension of a USD 10 million loan to the A-100 Development Group of Companies (A-100). The loan agreement was signed on 31 May 2015 to refinance construction of commercial real estate in Minsk and Minsk Region.

IFC is a global financial institution and a member of the World Bank Group, focused exclusively on the private sector in developing countries. A-100, one of the most active privately held developers in Minsk region, is involved in construction of commercial and residential real estate, including shopping centres, offices, residential districts, auto centres, logistics and warehousing complexes.

NEFCO provides new loan for bioenergy investment in Belarus

SORAINEN Belarus acted as local counsel for the Nordic Environment Finance Corporation (NEFCO) on the extension of a loan to JC JSC RindiBel aimed at expanding the latter’s production of bioenergy in Belarus. The project is financed by NEFCO’s Facility for Cleaner Production.

NEFCO is an international financial institution providing results-based green financing to generate positive environmental effects in the Nordic region. JC JSC RindiBel is a logging company that produces approx 60,000 m3 of wood chips annually with its existing fleet of chipping machines. After the investment, Rindibel will be able to reach annual production of some 132,000 m3 of wood chips, which will meet the increasing demand from energy companies that use chips for combined production of heat and electricity.

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