FX Week о влиянии санкций на российский рынок
Russian banks face struggle to access credit and PB
Author: Elena Mataro
Source: FX Week | 28 Aug 2014
Categories: Foreign Exchange, Prime Brokerage
Sanctions have reduced Russian banks' ability to trade in wholesale markets, but CLS's plans remain on track
Russian banks are finding it increasingly hard to access credit and prime brokerage services in global markets as Western banks begin to reduce or cut credit lines, following sanctions on a number of the larger institutions.
This could restrict the ability of Russian banks to trade in global wholesale markets, on top of the increased funding costs that some already face due to the ongoing conflict between Russia and Ukraine, and the resulting sanctions from the US and the European Union.
"Some foreign banks closed prime brokerage for all Russian banks and some of them are just keeping the most important clients to generate some profits. But, obviously, foreign banks are not in a position to further expand their credit lines to Russian banks," says Sergey Romanchuk, head of FX and money markets at Metallinvestbank in Moscow, and president of financial markets association ACI in Russia.
His warning follows the latest round of US sanctions targeting VTB, Rosselkhozbank and Bank of Moscow. Meanwhile, the EU has imposed a ban on purchases of new shares or debt maturing in more than 90 days issued by Sberbank, Russia's largest bank, and VTB.
Russian financial institutions are already facing higher borrowing costs, regardless of whether they are on the list hit by sanctions, as spill-over effects have pushed funding costs higher. In response to mounting concerns over their ability to fund their operations, the Russian government recently approved a capital injection totalling $6.6 billion to two of the banks facing restrictions - VTB and Rosselkhozban.
Now, second-tier and smaller financial players are being affected as well. "Some of the international wholesale prime-brokerage firms have reduced or indeed completely cut lines to second-tier Russian financial institutions," says Tim Bevan, a managing director of Russian firm BCS Prime Brokerage.
Bevan adds that those banks in the West that were looking to capitalise on Russia and the ruble's growing role in the global financial system have been forced to delay their plans, while players already operating in the space are being "very watchful".
"No one is taking drastic action, no one is cutting business lines that are significant, but there is the general feeling of putting business on hold for as long as it's possible," Bevan adds.
The prevailing uncertainty is also forcing fund managers to rethink their investment strategies. While the current sanctions are not affecting the RUB spot market, worries persist that a new round of restrictions could add to market woes.
"Normally, we do operate in the ruble market, but we have pulled out since the sanctions were put in place by the West. Many of our peers have also started unwinding positions they held there as geo-political risks become particularly difficult to measure, as well as the fact that the central bank of Russia (CBR) plays such an active part in the currency," says a portfolio manager at a buy-side firm.
Despite the upheaval, market participants are optimistic about the progress of Russia's efforts to move towards a free-floating currency and further integrate its financial infrastructure into global finance.
On August 18, the CBR announced it was widening the trading corridor within which the ruble can move while also reducing the amount of its daily intervention to $350 million, from $1 billion previously.
"The infrastructure story is much more important when looking at the medium-term health of the FX market in Russia, because this means proper integration of the Russian financial system into the global one is on track. Therefore, you have to draw the conclusion the market remains optimistic that this situation will be temporary," says Bevan.
Plans to add the ruble to the universe of currencies settled through CLS in November are also understood to be on track, despite the US-based market utility indicating it will adhere to any sanctions affecting the entities it deals with.
"I think the signs are quite good to think this situation is temporary and that the road map to include the Russian financial system into the global one, resulting in no market limitations, is still the same," Romanchuk says.
Author: Elena Mataro
Source: FX Week | 28 Aug 2014
Categories: Foreign Exchange, Prime Brokerage
Sanctions have reduced Russian banks' ability to trade in wholesale markets, but CLS's plans remain on track
Russian banks are finding it increasingly hard to access credit and prime brokerage services in global markets as Western banks begin to reduce or cut credit lines, following sanctions on a number of the larger institutions.
This could restrict the ability of Russian banks to trade in global wholesale markets, on top of the increased funding costs that some already face due to the ongoing conflict between Russia and Ukraine, and the resulting sanctions from the US and the European Union.
"Some foreign banks closed prime brokerage for all Russian banks and some of them are just keeping the most important clients to generate some profits. But, obviously, foreign banks are not in a position to further expand their credit lines to Russian banks," says Sergey Romanchuk, head of FX and money markets at Metallinvestbank in Moscow, and president of financial markets association ACI in Russia.
His warning follows the latest round of US sanctions targeting VTB, Rosselkhozbank and Bank of Moscow. Meanwhile, the EU has imposed a ban on purchases of new shares or debt maturing in more than 90 days issued by Sberbank, Russia's largest bank, and VTB.
Russian financial institutions are already facing higher borrowing costs, regardless of whether they are on the list hit by sanctions, as spill-over effects have pushed funding costs higher. In response to mounting concerns over their ability to fund their operations, the Russian government recently approved a capital injection totalling $6.6 billion to two of the banks facing restrictions - VTB and Rosselkhozban.
Now, second-tier and smaller financial players are being affected as well. "Some of the international wholesale prime-brokerage firms have reduced or indeed completely cut lines to second-tier Russian financial institutions," says Tim Bevan, a managing director of Russian firm BCS Prime Brokerage.
Bevan adds that those banks in the West that were looking to capitalise on Russia and the ruble's growing role in the global financial system have been forced to delay their plans, while players already operating in the space are being "very watchful".
"No one is taking drastic action, no one is cutting business lines that are significant, but there is the general feeling of putting business on hold for as long as it's possible," Bevan adds.
The prevailing uncertainty is also forcing fund managers to rethink their investment strategies. While the current sanctions are not affecting the RUB spot market, worries persist that a new round of restrictions could add to market woes.
"Normally, we do operate in the ruble market, but we have pulled out since the sanctions were put in place by the West. Many of our peers have also started unwinding positions they held there as geo-political risks become particularly difficult to measure, as well as the fact that the central bank of Russia (CBR) plays such an active part in the currency," says a portfolio manager at a buy-side firm.
Despite the upheaval, market participants are optimistic about the progress of Russia's efforts to move towards a free-floating currency and further integrate its financial infrastructure into global finance.
On August 18, the CBR announced it was widening the trading corridor within which the ruble can move while also reducing the amount of its daily intervention to $350 million, from $1 billion previously.
"The infrastructure story is much more important when looking at the medium-term health of the FX market in Russia, because this means proper integration of the Russian financial system into the global one is on track. Therefore, you have to draw the conclusion the market remains optimistic that this situation will be temporary," says Bevan.
Plans to add the ruble to the universe of currencies settled through CLS in November are also understood to be on track, despite the US-based market utility indicating it will adhere to any sanctions affecting the entities it deals with.
"I think the signs are quite good to think this situation is temporary and that the road map to include the Russian financial system into the global one, resulting in no market limitations, is still the same," Romanchuk says.