The Central Bank asks brokers for action scenarios in the event of sanctions being imposed on NCC

Brokers note the increased attention of the Bank of Russia to their actions with the possible expansion of Western sanctions against Russian infrastructure. The Central Bank is talking about regularly conducting stress testing of professional participants to check their financial stability. Companies themselves impose restrictions on the use of foreign currency assets by clients. According to experts, one solution could be the conversion of such assets into the currencies of friendly countries and gold.

Two brokers told Kommersant that last week they received letters from the Central Bank requesting scenarios of action in the event of sanctions being imposed on the National Clearing Center (NCC). Interlocutors at two large investment companies clarified that representatives of the Bank of Russia discussed these issues with them, but no letters were received.

This is not the first time that the regulator has raised the issue of potential sanctions against infrastructure organizations with professional market participants. In particular, in July 2022, the Central Bank discussed with players the formation of dollar and euro exchange rates if the National Clearing Center and the Moscow Exchange fell under sanctions.

In the latest letter (Kommersant has read the provisions from it), the regulator asked the companies to provide information about positions in the US dollar and the sources of funds used to form these positions.

The Central Bank is also interested in information about the procedure for fulfilling obligations to clients, including possible financial consequences for the company itself and its clients in the event of blocking transactions in foreign currency.

Companies must submit to the Central Bank an action plan aimed at complying with financial stability and prudential standards in the event of blocking the foreign currency of unfriendly countries in their accounts with credit institutions. In addition, the regulator is interested in what professional market participants are doing to reduce the volume of currencies of unfriendly countries in brokerage accounts.

The Bank of Russia did not confirm or deny the sending of letters to Kommersant. But they explained that they use stress testing of market participants to identify scenarios in which they may have problems with financial stability and violation of the rights and legitimate interests of investors. In particular, the Central Bank evaluates “the risk management systems of professional participants and possible actions in the event of one or another unfavorable development of events.”

NCC assured Kommersant that they are trying to “take into account all the risks as much as possible.” Professional participants are preparing for possible sanctions against NCC and do not want to be taken by surprise, as actually happened in the case of St. Petersburg Exchange (see “Kommersant” dated November 3), notes investment strategist of Arikapital Management Company Sergey Suverov. Since the beginning of November, trading on the site in foreign securities (denominated not only in US dollars, but also in euros and Hong Kong dollars) has been suspended.

Brokers themselves introduce restrictive measures regarding the use of currencies.

Digit Broker says that they have established bans on increasing positions in the Hong Kong dollar and euro, and in the first case, “positions have been forced to close in full.” In the euro and American dollar, positions up to 1000 USD are closed. e. At Tinkoff Investments, US dollars, yuan, Hong Kong dollars and bonds denominated in yuan cannot serve as collateral for an uncovered position. The broker also prohibited short positions in US dollars and yuan and recommended investors to close positions (promising otherwise to close them forcibly). According to media reports, at BCS, Finam, Tsifra Broker, Go Invest, the risk rate on foreign exchange instruments (that is, their collateral) was increased to 100%.

The Central Bank decided to “preventively disincentivize professional participants from having assets in the currencies of unfriendly countries, especially dollars,” says Mikhail Zhuzhalov, senior lawyer at Tomashevskaya & Partners.

If no protective measures are taken, then if sanctions are imposed against NCC, the final stages of the implementation of forward currency contracts, including those related to the supply of currency or large conversion, may be blocked, explains financial analyst Andrei Barkhota. Since the volume of such transactions is large, this “affects like a domino effect” on other market participants, he added. At the same time, the expert believes, the solution could be “the progressive conversion of balances into the currencies of friendly countries and gold.”

Ksenia Kulikova