After freezing service to Russian banks under U.S. sanctions in March, Visa and Mastercard now face a demand for a $3.8 billion US security deposit in Russia, as well as a strict new regulatory regime.
Vladimir Putin signed a law Monday geared at creating a homegrown credit card system and imposing new rules on international cards.
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The new law forbids international payment systems from cutting off services to Russian clients, demands they set up a processing centre in Russia and asks for a “security deposit” equal to the value of two days' worth of transactions.
That would amount to $3.8 billion, to be placed with Russia’s central bank by the two credit card companies. If they freeze operations for a Russian client, they can be fined 10 per cent of this security fee for each day without service.
Visa and Mastercard's stopped servicing payments for clients of Rossiya Bank, its unit Sobinbank and SMP Bank, owned by brothers Arkady and Boris Rotenberg, on March 21 after the U.S. began sanctions against Russia.
However, they continue to be responsible for 90 per cent of credit card transactions in Russia.
Both Visa and Mastercard say Russia’s measures are too severe and say they will negotiate with the government to find a solution.
"Several provisions in the law are unprecedented and will have a severe impact on the payments market in Russia — particularly cardholders, financial institutions and merchants," Visa said in a statement.