THE LAW OF THE REPUBLIC OF BELARUS

of December 14, 1990

"ON BANKS AND BANKING IN THE REPUBLIC OF BELARUS"
The present Law defines the economic and legal fundamentals of the functioning of the Republic of Belarus' banking system which consists of the National Bank of the Republic of Belarus, banks. The Law delineates the functions of the National Bank and banks. The present Law permits the establishment and functioning of banking institutions of other States. The scope of the Law covers all credit institutions on the territory of the Republic of Belarus.

SECTION I. General provisions

Article 1. Banks shall be state-owned, joint-stock, cooperative and other institutions for depositing and lending monetary funds in the form of credits, as well as for carrying out other operations in compliance with the present Law. The use of the word "bank" shall not be allowed in the name of a legal person, economic activities without a banking license granted in compliance with the present Law, exept cases when such use is stipulated by the current legislation, international agrreements or in cases where this term is not related to banking activities.

Article 2. In their activities banks shall be guided by the present Law, the Law on the National Bank of the Republic of Belarus, by other legislative and standard acts in force on the territory of the Republic of Belarus as well as by charters of their own.

Article 3. Banks shall be independent in their activities, and State bodies shall have no right to interfere into them. Banks shall not be liable for commitments of the State, while the State shall not be liable for commitments of the banks, if it is not otherwise stated in an agreement concluded by the bank and an authorized State body, or if the State has not assumed such a responsibility. Officials and specialists working in bodies of state power and state managment shall be banned to participate at the same time in banks' managerial bodies, exept in cases stipulated by the current legislation. Banks' officials and specialists shall be banned at the same time to hold managerial posts or to work in other organizations, enterprises and establishments irrespective of their forms of ownership.

Article 4. Without a licence from the National Bank of the Republic of Belarus it shall be banned to carry out the following banking operations: - to attract funds into deposits; - to grant credits on its behalf at the expense of the funds attracted including financial leasing; - to perform settlement and cash servicing of clients; - to encash ready money and carry out valuables transportation; - to make foreign exchange transactions; - to manage money resources according to an agreement with the owner or manager of the funds; - to perform operations with precious metals in cases stipulated by the legislation in force; The following operations shall be carried out by consent of the National Bank: - to issue guarantees and obligations, which fulfilment is to be in the money form, on behalf of third parties; - to perform factoring; - to make transactions with securities; - to perform leasing; - to lease special rooms or safes for documents and valuables storage;

Article 5. Banks shall be banned: - to grant credits to the Cabinet of Ministers and local bodies of state power to finance budget deficit. Credits to the Cabinet of Ministers to finance budget deficit may be granted only by the National Bank of the Republic of Belarus; - to make any transactions which may lead to illegal incomes; - to decrease without a preliminary written permission of the National Bank of the Republic of Belarus their ownership capital through redemption of shares or through participation in activities of other legal persons or by other methods; - to grant more favourable crediting conditions to shareholders of the bank or to other owners of the bank as well as to grant credits to the banks' employees at interest rates lower than the average interest rate in the bank as a whole.

Article 6. Banks, their establishments (representations, branches, branch offices) and other credit institutions functioning on the territory of the Republic shall pay state and local taxes, as well as charges and state duty in the amount and order determined by the legislative acts of the Republic of Belarus.

Article 7. Banks on the territory of the Republic of Belarus shall publish their annual balance and profit-and-loss report in due form and in terms established by the National Bank of the Republic of Belarus, upon confirmation of reliability of the submitted data by an auditing organization.

SECTION II. The banking system of the Republic of Belarus

Article 8. The banking system of the Republic of Belarus shall have two tiers and consist of the National Bank of the Republic of Belarus and banks and other credit institutions registered in accordance with the established order. The functioning of the National Bank of the Republic shall be regulated by the Law on the National Bank of the Republic of Belarus.

Article 9. The Savings Bank of the Republic of Belarus shall be a state-owned commercial bank. Its charter shall be approved by the Cabinet of Ministers of the Republic of Belarus. The Savings Bank of the Republic of Belarus shall attract ready available money resources of the population into deposits, shall make various payments under the clients' orders and shall perform other banking operations stipulated by the present Law. The Savings Bank of the Republic of Belarus shall specialize in credit and settlement services for the population, as well as in crediting entrepreneurship engaged in the production of consumer goods and rendering of services for the population. Besides, the Savings Bank of the Republic of Belarus may place credit resources on market conditions into liabilities of the Republic of Belarus, in the National Bank of the Republic of Belarus as well as to use them for crediting other activities envisaged in Article 4 of the present Law.

Article 10. The Bank for Foreign Economic Affairs of the Republic of Belarus (Vnesheconombank of the Republic of Belarus) shall be a joint-stock commercial bank. One of its founders shall be the Cabinet of Ministers of the Republic of Belarus. SECTION III. Banks, their establishment and termination of their functioning.

Article 11. Banks shall be established by founders - physical and legal persons, with the exeption of public associations having political goals. Banks may be established on the basis of state, private and mixed forms of ownership. Ownership capital shall be formed at the expense of resources of at least three bank's participants. Each participant shall not be entitled to have more than 35% of the ownership capital. Banks which are established with the State's participation are an exception. Ownership capital of a bank or a bank's branch as a legal person must be paid in full before registration. Ownership capital of a joint-stock bank shall be formed only by means of issuing registered shares. Contributions into the ownership capital or payments for shares may be made both in the money and non-money forms. It shall be banned to use attracted and borrowed funds as well as credits for the formation and replenishment of the ownership capital. Procedure and volumes of non-money contributions shall be determined by the National Bank of the Republic of Belarus. Forms, systems and rates of labour remuneration in banks shall be determined by bank boards. Foreign founders may establish on the territory of Belarus banks with 100 per cent of their own capital, joint banks on a share basis with Belarusian co-founders, branches and representations. Banks shall carry on their activities on the basis of licences for the performance of banking operations issued by the National Bank of the Republic of Belarus. No legal or physical persons shall be allowed to attract money resources with the aim of granting credits on their own behalf without a licence issued by the National Bank of the Republic of Belarus. The National Bank of the Republic of Belarus shall establish the payment rate for licences granted to perform bankig operations. Legal and physical persons which perform banking operations without a licence of the National Bank of the Republic of Belarus or use the word "bank" illegally shall bear responsibility in accordance with the current legislation.

Article 11-1. Foundation documents of banks shall be prepared in accordance with the recomendations of the National Bank of the Republic of Belarus. To obtain licences for the performance of banking operations, founders of a bank shall submit the following documents: - an application for granting a license for the performance of banking operations, including a feasibility report justifying the necessity to establish a bank; - data of professional fitness of two high executives and the chief accountant of the bank; - predicted balance sheets of the bank and calculations of its planned receipts, expenditures and profits for the end of the first year of its activities; - a charter of the bank; - declarations on sources of investments made into the bank's ownership fund; - a foundation agreement, minutes of its founders' conference and other documents according to the legislation in force. Charters and other foundation documents shall be composed and approved in accordance with the current legislation. To obtain a license for the performance of banking operations, foreign banks with participation of foreign capital shall additionally submit documents confirming the consent of the supervising body of the country of the foreign founder for participation of the latter establishment of a bank in the Republic of Belarus and containing proofs of the legal status and solvency of the foreign founder, and as regards physical persons - recommendations of at least two foreign legal persons or citizens of known solvency. A compulsory condition for the establishment of banks founded on the basis or with participation of foreign capital shall be presence of a foreign bank among its founders. The above requirements shall be also applicable to foundation documents when a foreign bank opens on the territory of the Republic of Belarus its branches or representations.

Article 11-2. Banks shall acquire the right of a legal person from the day of their registration by the National Bank of the Republic of Belarus. Banks shall inform the National Bank of the Republic of Belarus, within one month and in writing, about all changes made in their foundation documents so as to agree the changes. In case the makeup of owners of a bank is changed as well as contributions are increased, new investors shall be obliged to confirm the legitimacy of origin of their own resources. In case of replacement or appointment of one of top managers of a bank, the new manager shall have the right to take up his duties only after justification of his professional fitness by the joint commission of the National Bank of the Republic of Belarus, Ministry of Finance of the Republic of Belarus and other departments concerned.

Article 12.Banks shall enjoy the status of legal persons and function on the self-financing and commercial basis competing with other businesses. The banks shall be independent in deciding on the procedures for receiving and using the funds, performing other banking operations as well as on interest rates and commission. Banks shall maintain the necessary capital and adequate liquid resources and ensure diversification of their assets so as to prevent losses. In case bodies of state power and state management take a decision on granting credits on favourable terms, losses of banks shall be compensated for at the expense of resources from pertinent budgets. Banks shall make known to the public their average interest rates on credits and deposits through mass media and by other means which are not banned by the legislation in force.

Article 13. Banks, with the consent of the local authorities, may open branch and representation offices and entrust them with the rights within their competence. A bank's branch shall be an individual division performing banking activities on behalf of the bank established it. A representation of a bank shall be an individual division which represents its interests. Branches of banks shall perform banking operations from the day of their registration by the National Bank of the Republic of Belarus. Opening of branches and representations of banks, subsidiary banks, banks with participation of Belarusian capital, established outside the Republic of Belarus, shall be made in accordance with a license granted by the National Bank of the Republic of Belarus.

Article 14.Banks may create unions, associations or other formations to coordinate their activities, protect interests of their members and implement joint programs. In case banks decide to merge, their merging must be allowed by the National Bank of the Republic of Belarus.

Article 15. Banks shall function at the expense of their own resources or the funds mobilized or acquired from other banks. The banks may sell or buy resources both on the territory of the Republic and outside. Banks may sell or buy resources outside the Republic of Belarus only with the permission of the National Bank of the Republic of Belarus.

Article 16. The proper funds of banks shall consist of the ownership, reserve, contingent, currency and other funds. The minimum size of the ownership fund of a bank shall be determined by the National Bank of the Republic of Belarus. Banks may make investment into statutory funds of enterprises, organizations, cooperatives and other legal persons only on obtaining a permission of the National Bank of the Republic of Belarus and if their own investment sources are available.

Article 17. The functioning of banks shall be terminated upon the decision by their shareholders or other owners of the bank with a written consent of the National Bank of the Republic of Belarus, as well as in other cases stipulated by the legislation. The property of a liquidated bank, after settlements with the bank employees and fulfillment of obligations to physical persons - depositors, to the budget, banks and other creditors, shall be distributed among the stock holders (shareholders) in proportion to their shares on the day of liquidation (or according to other procedures specified by the charter of the bank). In case a court has declared a bank bankrupt, the property of the bank shall be sold in accordance with the current legislation. The announcement of the termination of the bank's functioning shall be published in the press.

Article 17-1. Claims of creditors made on a bank being liquidated shall be met from the remaining pecuniary resources and property of the bank. First, debts to physical persons and the budget shall be repaid. Claims made after the time period set for the claims has expired shall be met after meeting the claims made within the set time period. Claims of the creditors which have not been met because of insufficient pecuniary resources and property shall be considered met. Claims that have not been recognized by the liquidation commission shall also be considered met, if creditors do not submit claims to a court of justice or an economic court for meeting their claims within one month from day they receive a notice on full or partial non-recognition of their claims.

SECTION IV. Organization of activities of banks

Article 18. Banks, their branches, which have a status of legal entities, and representation offices shall keep their available financial resources on accounts with the National Bank of the Republic of Belarus.

Article 19. Payments between banks shall be made through correspondent accounts.

Article 20. Banks in accordance with the standards set by the National Bank of the Republic of Belarus shall transfer part of their credit resources to reserve accounts with the National Bank of the Republic of Belarus.

Article 21. Banks and their clients shall build their relations on a contractual basis. Clients shall be free to choose banks for creditand-payment services. Procedure for opening accounts by banks to clients, as well as sanctions to banks and their managers for violation of the procedure shall be established by the legislation of the Republic of Belarus and normative acts of the National Bank of the Republic of Belarus. Banks shall have no right to deny payment-and-cash service to a client if it is provided for in the charter of the bank. Banks shall be responsible for timely execution of their clients'orders.

Article 21-1. A bank shall be obliged to have its internal auditing service.

Article 21-2. Certification of reports of a bank shall be executed by an independent external auditor. It may be an auditing organization (auditor) obtained a licence from the National Bank of the Republic of Belarus with the right to conduct auditing in the banking system.

Article 22. Banks shall guarantee privacy concerning operations, accounts and deposits of clients. Information on operations and accounts of legal persons may be revealed to the legal persons themselves, investigation bodies, courts, the National Bank of the Republic of Belarus, the Chamber of Control of the Republic of Belarus, auditing organizations, tax authorities on taxation issues, as well as to financial bodies on issues connected with allocation of budgetary appropriations. Information on a depositor (physical person) and on operations for a deposit may be revealed to: - bodies of inquiry and preliminary investigation and courts in connection with criminal proceedings considered by them if, according to the law, such proceedings may bring about confiscation of property, as well as to courts in connection with civil cases which arise from criminal proceedings; - courts in connection with civil cases considered by them and related to collection of alimony (if no labour remunerations or other property are available which may be claimed) or devision of a deposit owned by the both spouces, collection of amounts received as loans and other cases; - state notary offices in connection with legacy cases related to deposits left after death of depositors. Persons guilty of disclosure of privacy of deposits shall be made responsible in accordance with the current legislation.

Article 23. The funds and other valuables of legal persons deposited in banks may be sequestrated only on court ruling, by orders of investigation or bodies, on decisions by the National Bank of the Republic of Belarus ( in relation to legal persons which have refused to fulfill or do not fulfill commitments of a contract for the security of specific commitments and guarantees given by National Bank of the Republic of Belarus to a foreign party). Penalties may be imposed only in accordance with writs of execution issued by courts, orders by economic courts and other documents of execution, or in cases stipulated by the legislation of the Republic of Belarus - on demand of financial bodies or other organisations. In case of sequestration of money resources and valuables kept on accounts and in deposits the bank shall cease expenditure operations on the account within the amount which has been sequestrated. The funds and other valuables deposited by foreign and international organizations may be sequestrated or subjected to penalty only on arbitration ruling according to the procedures established by the legislation in force. Monetary funds and other valuables deposited by natural persons may be sequestrated only on the following grounds: - on court ruling and by orders of investigation bodies on the tried and investigated criminal cases, as well as in instances provided for by law, when examining cases involving confiscation of property; - on court ruling (orders of People's Judges) who examine civil cases arising from the criminal ones, alimony cases (if salary or other property which can be subjected to penalty is absent), or cases dealing with the division of the deposit jointly owned by both spouses. Penalty on the funds and other valuables belonging to physical persons can be imposed only on the grounds of a court sentence or ruling satisfying a civil action arising from a criminal case, or on court ruling or an order of a People's Judge to pay alimony (if salary or other property which can be subjected to penalty is absent) or on court ruling to divide the deposit jointly owned by both spouses. Confiscation of the funds and other valuables belonging to physical persons can be effected on the grounds of a sentence which has entered into legal force or a court ruling on confiscation of property passed in accordance with the law. On the grounds of courts' documents of execution concerning penalizing debtors in foreign currencies at the expense of their money resources kept in a bank, banks shall be obliged to buy foreign exchange at such debtors' expense and transfer these amounts to payees.

Article 24. Banks shall meet their own liabilities with all their funds and property. They shall not meet liabilities of their participants. The participants shall not meet liabilities of the banks, if not otherwise specified by their charters or agreements.

Article 25. As collateral for the timely repayment of a credit the banks shall accept a pledge, guarantees and liabilities in other forms adopted in banking with the exception of securities of their own issue.

Article 26. Banks shall keep accounts and records in accordance with the unified rules set by the National Bank of the Republic of Belarus.

Article 27. Banks submit their annual balance and other accounting documents to the National Bank of the Republic of Belarus at a date established by the National Bank of the Republic of Belarus. SECTION V. Deposits of physical persons. Protection of depositors' interests

Article 28. Physical persons may deposit their funds in the Savings Bank of the Republic of Belarus or in any other bank. Depositors shall have a free hand in handling their deposits, make profit in the form of interest on their deposit and in any other form offered by banks, make clearing payments, and enjoy other forms of bank services. An under-age physical person may be a depositor. Citizens of the Republic of Belarus, foreign citizens and stateless persons may be banks' depositors.

Article 29. The Belarusian State shall guarantee the full safety of funds and other valuables of physical persons deposited with institutions of the Savings Bank of the Republic of Belarus and their immediate withdrawal on demand of depositors. The State shall not be liable for commitments of other banks except for deposits of citizens with the Savings Bank of the Republic of Belarus. Other banks shall be obliged to insure deposits of the population in accordance with the procedure and conditions set by the National Bank of the Republic of Belarus.

Article 30. Interest on deposits of the Savings Bank of the Republic of Belarus shall not be subject to state and local taxation. All the documents connected with the transfer of deposits to legatees shall be exempted from the state tax.

Article 31. Deposits in the Savings Bank of the Republic of Belarus gained by the right of succession shall not be taxable.

Article 32. Depositors shall have the right to set a condition in their will obliging the bank, in case of their death, to surrender their deposits to any legal or physical person or to the State in compliance with the legislation in force. In case of an intestate depositor his deposit after his death shall be surrendered to his legatees in accordance with the procedure established by the legislation of the Republic of Belarus.

SECTION VI. Declaration of borrowers' insolvency

Article 33. Banks-creditors shall have the right to request judical bodies to consider the issue on economic insolvency and bankruptcy of debtors which do not fulfill their contractual commitments.


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