Foreign investors were sent to “I” accounts

The Central Bank of the Russian Federation has established a new regime for accounts of type “I”. If previously foreign owners of Russian sovereign Eurobonds received payments through such accounts, now the funds will be used to pay off debt on foreign securities. To maintain payments, foreigners must contact NSD, otherwise they will have to demand money from European depositories. According to experts, the introduction of the new regime demonstrates progress in solving the problem of frozen assets and adds liquidity to the Russian market.

On September 15, the Board of Directors of the Bank of Russia approved and published the rules for the new regime of type “I” accounts. The document was developed to fulfill obligations under Eurobonds of the Russian Federation in accordance with Decree No. 665 of September 9 and comes into force from the date of publication.

The “I” investment account regime was initially established in June last year to service the payment of income on Russian sovereign bonds in favor of foreign holders.

In particular, it became possible to receive funds, although payments on the shares and bonds they own are not available to Russian owners of foreign securities due to EU sanctions against NSD, explained Andrey Shpak, partner at Tomashevskaya & Partners. “Moreover, European depositories reported the actual misappropriation of billions in coupon and dividend payments that went into the frozen accounts of Russian owners in Euroclear and Clearstream,” he added.

In particular, Euroclear earned €1.74 billion in the first half of 2023 from blocked Russian assets (from funds received from interest payments and redemption of issues), which more than doubled the 2022 figure of €824 million.

Funds credited but not claimed by the corresponding Eurobond holders remained blocked in an “I” account opened in the name of a foreign nominee holder, said Gleb Boyko, a lawyer at the NSP law office. Thus, according to the annual report of Euroclear, in the type “I” account opened in the name of the depositary, as of December 31, 2022, RUB 28.9 billion were accounted for. In addition, assets in the type “C” account were estimated at 188.5 billion rubles.

A presidential decree dated September 9 established a new procedure for receiving income on such bonds. For Russian investors storing assets in Russian depositories, nothing changes – income will be automatically credited to brokerage accounts without the participation of the investor, notes Artem Mayorov, director of the asset management department of Ingosstrakh-Investments Management Company. However, for other participants, it is required to contact NSD with an application within 60 days from the date of accrual of income, and if it is positively reviewed, then the income will be paid within 90 days from the date of accrual of income, the expert adds.

In essence, foreign owners are invited to receive payments due in a similar way from European depositories at the expense of the funds of Russian investors withheld by them, Mr. Shpak notes.

Type “I” accounts were introduced for two purposes, says independent financial analyst Andrei Barkhota. The first is to demonstrate progress in solving the problem of frozen assets, the second is to add liquidity to the Russian market and “a bit of confidence for investors.” “According to the mega-regulator, crediting and debiting funds from type “I” accounts can, to one degree or another, ease the pressure on the ruble and be a counter-inflationary factor.

At the same time, the issue of replacement bonds will probably continue, but at a slower pace than before,” the expert believes. At the same time, this event did not have an impact on the over-the-counter market quotes, notes Alexander Tsyganov, director of the investment and corporate business department at Digital Broker.

Ksenia Kulikova, Ekaterina Volkova