Change no more

 

Money exchange is not, strictly speaking, a banking activity. Though a modern bank can do currency conversions in cash, the core of its business lies elsewhere: securities dealing, investment management and, first and foremost, receiving money on deposits and lending funds so collected to businesses and consumers.

So, are there any objections, in principle, as to why exchange bureaus cannot exist as separate businesses outside the bank doors? Russia’s Central Bank thinks there are.

The CBR wants to eliminate all money exchange points in Russia. Their status should be changed to bank offices; otherwise from October 1 they will have to close. There are over seven hundred exchange bureaus in Russia, 85 per cent of which are located in Moscow, and for many of them this plan means the end.

As the law currently stands banks can do exchange operations with cash either in their offices or in standalone exchange points. The latter must belong to a bank, in practice to a small one, beyond the top 500.

Most of them will not be able to transform into full-fledged bank branches carrying out not only simple conversions but also, for example, lending, taking deposits, or making payments. As a result, more than half of the money exchange points will have to close.

The initiative of the Central Bank is being presented as a concern for consumers – they say that money changers often cheat - and conducive to better services and better rates. But in fact, it aims to eliminate smaller banks and, probably, deal another blow to the main enemy of Russian economy, illegal operations with cash.

 

March 19, 2010
photo: Alexander Bryljaev - Fotolia.com

 

 

 

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