Reserves for assets blocked due to sanctions must be created at one “point” to avoid duplication harmful to the capital market, believes Sergei Shvetsov, Chairman of the Supervisory Board of the Moscow Exchange.
“It seems to me that it is important to determine where they (reserves for frozen assets) are created in cases where there are chains. Because the asset is frozen abroad, but there are nested chains of owners of this asset, and if everyone creates reserves, then, of course, there will be redundant history,” Shvetsov said, speaking on Tuesday at a meeting of the Financial Market Development Council under the Federation Council.
According to him, it is necessary to determine on which balance sheet these reserves are created. “This is important, including for the capital market, because a significant part of the assets is directly related to the capital market,” said the former first deputy chairman of the Central Bank of the Russian Federation.
Last week, the Bank of Russia announced that it would give banks a 10-year “installment plan” to create reserves for blocked assets. We are talking about assets whose disposal is subject to clear restrictions due to sanctions and for which there are no alternative sources of compensation (correspondent accounts, interbank loans, other claims on foreign banks, loans and other claims on borrowers from countries that have imposed blocking sanctions, investments in subsidiaries in these countries, made payments on Eurobonds that are blocked in Euroclear/Clearstream, as well as foreign currency accounts in NSD). “Installment” assumes that over 10 years, banks will have to evenly reduce the net (that is, minus reserves) volume of blocked assets.
From the beginning of March, Euroclear and Clearstream stopped the operation of inter-depository bridges with NSD, since the beginning of June this provision was legally enshrined at the level of the European Union, which imposed sanctions against NSD. In October, the European Commission published clarifications that gave the market some hope in the fate of the frozen assets. It follows from the document that the authorities of individual EU member states can authorize the implementation of transactions necessary to close, by January 7, 2023, contracts and agreements concluded before the imposition of sanctions against NSD on June 3. NSD, in turn, said that after consultation with Euroclear and external European consultants, it has sent requests for general licenses to the Belgian and Luxembourg ministries of finance to unlock the assets of all non-sanctioned investors and expects to receive a general permit in October.
Almost simultaneously with the suspension of inter-depository bridges with the EU, Russia introduced its own restrictions. By presidential decree of March 5, special ruble accounts of type “C” were introduced. On these accounts, among other things, incomes on securities owned by “unfriendly” non-residents are blocked. It is possible to convert them into currency only with the permission of the Russian authorities. As of the beginning of November, the total amount of funds on such accounts, according to the Central Bank, exceeded 280 billion rubles.
As regards the restrictions imposed, the right to provide exceptions was raised to the presidential level, and for the types of transactions, powers were transferred to the subcommittee of the government commission on foreign investment, Deputy Finance Minister Alexei Moiseev recalled in an interview with reporters on the sidelines of the Council for the Development of the Financial Market.
“In general, there are such powers, it's another matter that such decisions (on unblocking from the Russian side) are considered and adopted , only if there is a clear interest of Russian beneficiaries. If there is a Russian business that comes and says that they have something stuck somewhere and in order to hang, some kind of permission is needed, “Moiseev described cases in which the subcommittee goes to the applicants.