The Central Bank of Russia said it would now allow non-resident banks from "unfriendly countries" — a Kremlin term for states that have condemned the invasion of Ukraine — to participate in the country's forex markets.
But the change in policy comes with a condition — trades are allowed only if the prices in the contracts do not deviate by more than 2% from the average prices in Russian and international forex markets, the bank said in a statement.
The regulator has kept a ban on forex trading by "unfriendly country" entities, such as banks and companies, which are not located in Russia. And the central bank will still ban any currency trades that involve rubles for lenders now allowed to participate in Russian markets.
"The new decision will allow Russian banks to better meet the demand of companies and citizens for specific foreign currency," the bank said in the statement.
The regulator first brought in capital controls soon after Russian troops crossed into Ukraine on Feb. 24. The central bank said at the time that citizens holding accounts in dollars and other convertible currencies would be allowed to withdraw no more than $10,000 in cash until Sept. 9. Withdrawals will be given in dollars, at the market rate on the date, regardless of which currency the account is in, the central bank added.
The state institution has also imposed limits on transfers involving foreign bank accounts, although it has gradually loosened these restrictions as Russia adjusts to new economic conditions under sanctions.
The central bank has taken a leading role in the Kremlin's response to the economic shock of sanctions after the invasion of Ukraine.
British MPs heard in April from Elina Ribakova, deputy chief economist at the Institute of International Finance, that the central bank's strategy was "extremely successful" in preventing a run on banks and other economic disasters, eventually allowing the Russian economy to weather the storm.
Vladimir Putin's regime has also used several economic tools to keep the Russian economy afloat despite it being partly cut off from world markets. One of his government's policies was to freeze Russian banks' credit ratings for five months in March. The Kremlin also introduced a new law in April that forced all Russian companies to remove their shares from foreign stock exchanges as the country attempted to escape the effects of the sanctions.
Sanctions have severely damaged the central bank itself, as it had €22 billion ($22.5 billion) frozen in its account with the French central bank after European Union sanctions were imposed. The EU has now hit Russia with multiple tranches of sanctions since the invasion of Ukraine, and the bloc is expected to ban imports of gold from the country after a package of additional measures is passed.
--Additional reporting by Najiyya Budaly and Joel Poultney. Editing by Joe Millis.
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