Overview of Russian Decree on Repatriation of Securities Proceeds
Residents of the Russian Federation, along with entities under their control, will gain a path to reclaim payments for securities issued by Russian entities that have been held in foreign nominee accounts and by paying agents since spring 2022. This provision is laid out in a decree issued by President Vladimir Putin on March 19. The measure covers a broad spectrum of instruments including shares, depositary receipts, and bonds issued by Russian issuers, as well as state securities such as OFZs and Eurobonds.
To initiate this process, security holders must file an application with the Russian depository or with the Eurobond borrower within a two-month window from the date when the Central Bank’s decision is published. The application should include details of the ruble account and the documents listed by the Central Bank to support the claim. The submission clarifies the holder’s eligibility and provides the necessary verifiable data to prompt consideration by the custodian.
After the deadline for accepting applications passes, the Eurobond custodian or borrower has 31 days to review the claims and decide on payment or rejection. A rejection may occur if the requested amount exceeds the funds available in the designated account or if there are doubts about the accuracy of the provided information. If the decision is to proceed with payment, the depositary informs the foreign candidate or their representative. In the absence of objections, an instruction is then issued to the bank to transfer the funds to the security holder within 10 days.
The decree also formalizes a mechanism to replace ruble liabilities held by the NSD to foreign depository institutions with liabilities denominated in foreign currencies. This is done by transferring funds from the respective accounts in those infrastructures, enabling the central department to fulfill its obligation to return balances from type C accounts and to align payment structures with foreign settlement frameworks where appropriate.
Additionally, an interim procedure has been introduced for handling payments on new Eurobond obligations. The holder may submit an application, including ruble account details, to the debtor within 60 days from the date of payment. Payments under this interim regime are made in rubles at the Central Bank’s exchange rate on the payment date, ensuring a standardized rate application for these transactions.
Historically, the regime has evolved from prior arrangements involving the Ministry of Finance, which studied frozen assets and explored exchange options on the St. Petersburg Stock Exchange. The updated framework builds on those discussions by establishing clear timelines and verification steps to ensure orderly reclamation of assets while preserving the integrity of settlement processes. The overarching objective is to provide a transparent channel for Russian residents and controlled entities to recover value tied to Russian issuers, while maintaining compliance with the existing regulatory and banking infrastructure.
In summary, the decree marks a coordinated effort to streamline repatriation of securities proceeds, address the replacement of ruble liabilities with foreign currency liabilities where needed, and set forth definitive deadlines for applications, verifications, and transfers. The approach emphasizes timely processing, robust validation of claims, and alignment with the Central Bank’s supervisory framework to ensure accurate and secure settlements for eligible holders.