Euroclear approved to service Russian debt

After months of anticipation, Euroclear Bank has finally gained approval from Russia’s Federal Financial Markets Service to offer services for a range of Russian debt securities.

The service will be provided through the country’s central securities depository. The development ends months of speculation as to whether Russia’s bonds would become ‘Euroclearable’.

However, the journey is not over yet, as Euroclear can only start offering its services after the Russian public authorities approve the National Settlement Depository (NSD) as Russia’s official central securities depository.

The timeframe for this development is not yet clear and depends on how quickly the local authorities act on the matter. However, some market practitioners expect this development by the end of the year.

Once this happens, Euroclear will be able to offer post trade services for Russian federal loan obligations (OFZs), one the most actively traded classes of Russian government bonds, as well as other Russian government and municipal bonds, corporate bonds and securities issued by foreign entities. The services include cross-border transaction processing, asset servicing and collateral management.

Frederic Hannequart, Euroclear’s chairman, said: “The bilateral link aims to provide the highest level of asset protection for clients using the service. Settlement risk should decline as settlement finality will be based solely on the NSD’s records. Working directly with NSD is the best way forward to achieve the levels of efficiency, effectiveness and operational risk control that our clients expect.”

Cooperation between the two organisations dates back to 2007, when they signed a memorandum of understanding, laying the foundation for information sharing and potential future co-operative initiatives.

Eddie Astanin, CEO of NSD, added: “Client abilities to conduct cross-border transactions in accounts opened with our organisations means increased transparency and, as a consequence, improved attractiveness of the Russian market for global investors. We expect this step will have a positive impact on exchange activities of Russian issuers, where they will reach a greater pool of national and foreign investors.”

Russia’s debt outstanding is valued at $302bn, of which 58% is in government bonds and the remainder in exchange bonds, corporate and regional bonds.

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