update: Russia adopts countermeasures to support its financial markets | Morgana Lewis
Russian authorities are taking action on several fronts to support financial markets and keep liquid assets in Russia, including a new set of countermeasures introduced by President Vladimir Putin. The Central Bank of Russia also plays an important role in mitigating the effect of recent economic sanctions against Russia.
President Putin issued Executive Order No. 81, “On additional temporary measures of an economic nature to ensure the financial stability of the Russian Federation(Decree), March 1, 2022, which follows decree n° 79 of February 28, 2022.
The new decree provides for a number of measures with immediate effect or from March 2:
- The prior authorization of the Government Commission for Control of Foreign Investments (headed by the Russian Prime Minister) is required for the following transactions between Russian residents (individuals and companies) and foreign persons residing/registered or having their main establishment / main source of income in a country that has imposed sanctions on Russian citizens or companies (foreign persons concerned):
- Grant loans and credit facilities in Russian rubles to relevant foreign persons (unless such transactions violate Russian laws).
- Transactions with relevant foreign persons resulting in the transfer of ownership of securities or real estate.
- Certain transactions previously prohibited by the decree of February 28, namely (1) granting of loans in foreign currency by Russian residents to foreign persons concerned and transfers of foreign currency by Russian residents to their own accounts with foreign financial institutions or (2) granting currency transfers with the use of foreign electronic payment systems without opening a bank account.
- As the decree points out, the discharge can be accompanied by conditions under which the particular transaction must be carried out or executed. Within five days of the decree, the Russian government must adopt a licensing procedure.
- The measures imposed by the decree also apply to any transaction carried out between Russian residents and non-affected foreigners if this transaction concerns securities and/or real estate acquired by non-affected foreigners from the affected foreigners after February 22. 2022.
- Transactions (operations) aimed at the acquisition by foreigners concerned of any securities may be carried out through transactions organized on the stock exchange, subject to authorization by the Central Bank after consultation with the Ministry of Finance. The required authorization will state the terms and conditions of the authorized transaction (operation).
- Credit institutions are authorized to make transfers in foreign currencies to their correspondent accounts opened with foreign banks subject to the restrictions imposed by the decree.
- As of March 2, 2022, people cannot carry more than US$10,000 in cash or equivalent (calculated at the official Central Bank exchange rate) when leaving Russia.
The decree formalizes the initiative announced by Prime Minister Mikhail Mishustin earlier on March 1, 2022 to prevent foreign investors from leaving Russia.
Since February 28, 2022, the Central Bank has adopted several measures to support the financial markets:
- On February 28, 2022, the Central Bank ordered Russian brokers to temporarily suspend sales by foreign persons (natural and legal) of their positions in securities. Brokers must report to the regulator on compliance with this temporary suspension.
- According to reports, the Central Bank has also ordered custodians and registrars to temporarily suspend the transfer of dividends and other proceeds from Russian securities to foreign persons for an initial period of six months, and new restrictions imposed to Russian companies to distribute dividends to their foreign shareholders could be expected (no official communication has been issued; this information requires verification).