07.03.2015 00:23
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Friday, March 6, 2015
Valentin Katasonov. What does it mean seizure of assets of two Russian banks in the US? – A REGNUM
Information Reflections
One of the main economic news the end of this week – Information of the American edition The Wall Street Journal, citing data from the US Treasury to freeze assets of two Russian banks. We are talking about banks “Russia” and SMP, which came under US sanctions a year ago, in March 2014. The first one belongs to Yury Kovalchuk, the second – Rotenberg brothers. Named the total amount of frozen assets – 640 million. Dollars. In the accounts of the bank “Russia”, including its subsidiaries, is locked 572 million. US., Which at the current exchange rate is equivalent to about 10% of total assets in 2013, the newspaper said.
First, the bank account has been frozen “Russia” in JP Morgan Chase, which is 73 million. Dollars. Second, were blocked funds of $ 435 million. US., Owned by Computershare, in which the bank “Russia” put their money. The company is engaged Registrar Computershare business, including management of dividend payments. In this case it may cost about frozen securities rather than cash. Also were blocked accounts SMP Bank in various US banks, including Citibank, Deutsche Bank, MasterCard – at least 65 million. Dollars. SMP Bank representative, however, made a statement that the accounts frozen in US funds are not significant, and their sum is less than than indicated in the documents of American Finance.
In this story interesting is that seizure of assets occurred only a year after against these banks were announced sanctions. Back in the spring of last year waiting for big sensations associated with such growth arrest. However, all sensation is reduced to the fact that the two operations were blocked by Russian banks with plastic cards MasterCard and Visa. But the foreign assets of the bank “Russia” were very solid. The statutory financial statements as of March 1, 2014 the obligation of non-residents to the Bank “Russia” were equivalent to $ 101 billion. Rubles. This amount, in particular, includes funds on correspondent accounts in non-resident banks (45 billion. Rubles), short-term deposits (37 billion. Rubles). Another 9 billion. Rubles assets – a corporate loans to non-resident, and 10 billion. – Other foreign assets. This is money that the bank held abroad. There were solid assets abroad and at SMP Bank. However, the bank̵ 7;s management argued that the United States did not have assets.
Why seizure of assets took place a year later? Maybe the owners of Russian banks believed that their assets are well camouflaged and US authorities to uncover them? Or maybe there were some not advertised by Washington guarantees that the above listed assets the US government will not touch? Or assets are not blocked, but was blocked by the possibility of their withdrawal from the US? In any case, the arrest of assets of the Russian banks – a signal, a sign that the economic sanctions against Russia in general and in particular the Russian banks in the near future may become tougher.
It is appropriate to recall that last week’s news Bloomberg News, citing sources in the US government announced plans to Washington on a possible “shutdown” of several Russian banks from the global financial system. Washington could resort to this if the truce in Ukraine will be disrupted. The sanctions would include a ban on US citizens, residents and companies to interact with these Russian banks, as well as allow the United States to freeze any of their assets under US jurisdiction. It is also possible ban on banking transactions in US dollars for Russian banks.
So, the last story of two Russian banks makes us think again: how Western sanctions in the form of arrest of foreign assets could seriously affect the position of Russian banks ? To do this, we turn to the Bank of Russia, which give an idea of the scale of the foreign assets of the banking system of the Russian Federation (Table. 1). This picture is incomplete because for some types of assets the Bank of Russia does not give a breakdown on domestic and foreign assets. For example, real estate and other physical property. But the bulk of the assets is reflected in the table. 1.
Table. 1. Foreign assets of Russian banks (at the beginning of the year, billion. Rub.)
Source: Review of the Russian banking sector. Analytical indicators. The Bank of Russia. February 2015 (№148)
As you can see from Table. 1, for the period 2013-2015. amount of foreign assets of Russian banks rose from 5.0 trillion. rub. up to 8.4 trillion. rub. Keep in mind that during this period there was a decrease of the exchange rate of the ruble against the dollar – to 30.37 rubles. January 1, 2013 to 56.24 rubles. on January 1, 2015 Thus, in foreign currency equivalent foreign assets of Russian banks decreased from 164.3 billion. dollars. to 148.8 billion. dollars.
At first glance, the data presented in Table. 1, very different from the figures of the Bank of Russia on the international investment position of the banking sector of the Russian Federation (Table. 2). The difference is about $ 120 billion. Dollars.
Table. 2. International Investment Position of the Russian banking sector assets (as of 1 October 2014 г.)
But the fact is that in the international investment position of the Russian banking sector reflects not only the assets that are included in Table. 1, but also cash currency, foreign currency deposits and other accounts that are located in the Russian banks, as well as loans in foreign currency that are issued by Russian banks residents. Of course, any foreign currency assets in dollars and euros are at risk, but still the part of foreign currency assets, which is placed inside the Russian Federation, more protected from economic sanctions from the West. Those assets that are presented in Table. 2, can be called “international assets of the banking sector in the broad definition».
Table. 3. The share of foreign assets of Russian banks in their total assets (at the beginning of the year,%)
Source: Review of the Russian banking sector. Analytical indicators. The Bank of Russia. February 2015 (№148)
Table. 3 shows the relative performance of foreign assets. The main part of the assets fell on loans to non-residents and balances on deposits and other bank accounts of non-resident banks. Overall, the share of foreign assets in total assets of the banking sector in recent years was at a level of 10-11%. If we consider the foreign assets broadly defined (Table. 2), their share of all assets of the banking sector in Russia is estimated to be 19-20%.
The Bank for International Settlements at the end of last year published statistics to assess the possible loss of Russian and foreign banks in the event of an escalation of economic sanctions and their transition into a phase arrest and confiscation of bank assets. He also appreciated the assets of the Russian banking system in two versions – the broad and narrow. The broad definition of foreign assets BIS defines the term total foreign claims (total foreign claims). At the middle of 2014 they amounted to 235.5 billion. Dollars. The bulk of these assets – foreign loans and credits of the Russian banking sector, which amounted to 140.5 billion. Dollars. BIS in the foreign assets (broad definition) Russian banks includes not only loans and loans, but also investment funds on correspondent accounts, deposits, foreign exchange, etc.
The foreign assets of the banking sector in Russia look very modest compared to the giant foreign assets of banks in the US and the leading countries of Western Europe. In terms of foreign assets of the banking system of the Russian Federation is comparable to the banking systems of relatively small European countries like Norway (299.7 billion. Dollars.), Austria (292.0 bln. Dollars.), Finland (274.6 billion. Dollars.) . BIS also provides information on the geographical distribution of foreign assets of Russian banks (Table. 4).
Table. 4. The foreign assets of Russian banks in the allocation for individual countries (as of 1 July 2014 г.)
* Calculation of the total value of 25 countries .
In the United States accounted for about 10% of the foreign assets of the banking system in Russia. A significant portion of these assets – funds on correspondent accounts in American banks. Loss of our assets from sanctions Washington will obviously not fatal to our banking system (although some banks they can be very sensitive). But the loss will be much more serious for our banks if the sanctions to freeze assets connected to European countries.
The BIS also gives an estimate of foreign assets in the narrow sense. For this purpose, the terms total international claims (general international requirements), external assets (foreign assets). The external assets refers only to those assets that are formed by cross-border transactions. Such foreign assets were estimated at 166.8 billion. Dollars. The remaining 69 billion. USD. – Assets placed within the Russian Federation in foreign currency (loans, deposits). Foreign assets of Russian banks in the narrow sense (international claims) located almost exclusively in those countries that have imposed economic sanctions against Russia.
In order to reduce the damage caused by the introduction of tougher sanctions against the West in the Russian banking system is necessary elimination of bank assets Russia from the West and moving them to other jurisdictions. For example, in the countries of the Eurasian Economic Union and the countries of the BRICS group. In the future, it is also advisable to transform dollar assets (both external and internal) to another currency, especially in light of recent threats from Washington to block the operations of Russian banks in US dollars.
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