Russian banks have been hit hard by the ongoing global financial squeeze sparked by the mortgage crisis in the United States. The Russian government has recently taken unprecedented measures to pump billions of U.S. dollars into the domestic banking system to shore up its liquidity.
The bill was approved by the lower house of parliament on October 23 and by the upper house four days later.
The law establishes a legal framework for prompt and effective measures to stave off bankruptcy in the banking sector.
It empowers the Central Bank to intervene to help ailing banks, in particular, to provide additional funding to bail them out, put them into receivership, forcibly reduce their equity capital, and a host of other measures designed primarily to protect depositors.
Russian President Dmitry Medvedev recently signed a bank deposit insurance law, increasing the amount guaranteed to 700,000 rubles ($26,800) from 200,000 rubles.
The Central Bank previously granted $50 billion in subordinated loans to Russian companies and banks through the country's national development vehicle, Vnesheconombank, to help them refinance their foreign loans.
Starting from October 20, the Central Bank has been holding unsecured loan auctions for a large group of Russian banks to help the domestic banking system handle a cash shortage.
