Putin aims to avert defaults with Rouble payment to creditors

The decree establishes temporary rules for sovereign and corporate debtors to make payments to creditors from “countries that engage in hostile activities” against Russia, its companies and citizens. The government will prepare a list of such countries within two days.

Russian corporate bonds denominated in foreign currencies have plunged to deeply distressed levels in recent days as investors weighed the impact of sanctions imposed on the country in the wake of its invasion of Ukraine. The Russian government responded to the sanctions by reducing dramatically access to foreign currencies, which could restrict the ability of bondholders to receive interest and principal payments.

Separately, clearing houses Clearstream and Euroclear stopped accepting the rouble as settlement currency and have excluded all securities issued by Russian entities from all Triparty transactions, barring a traditional channel used to make payments to bondholders.

In a separate announcement on Sunday, the Central Bank of Russia said it will temporarily ease reporting requirements for Russian lenders in an effort to shield them from the pressure of sanctions. Commercial banks will no longer have to publish their monthly accounts on their websites, though they will still have to submit them to the central bank and then can disclose them to counterparties, the regulator said.

According to Saturday’s decree on servicing foreign-held debt, payments will be considered executed if they are carried out in rubles at the central bank’s official rate.

Debtors can ask a Russian bank to create a special “C” ruble-denominated account in the name of foreign creditors for settlement, while local creditors will be paid through Russian depositories. The rule applies to amounts in excess of 10 million rubles ($81,900) per month.