Exclusive: Client Begs Top Custodian Banks To Stay In Russia

Banks face increasing pressure to commit to the custody role
Banks say they will meet the obligations of existing customers
Some clients are afraid that exits will continue as costs soar

London / New York, March 23 -Global banks such as Citigroup Inc (CN), JPMorgan Chase & Co (JPM.N) and Societe Generale (SOGN.PA) promise to continue as custodian banks in Russia. Faced with pressure to Rivals and funds are worried that they may lose services that are essential to future investments in the country.

Traders, bankers and executives from three other financial institutions ask Reuters to rest assured on behalf of their clients about the long-term plans of each bank in these businesses to liquidate, settle and protect billions of dollars in Russia’s holdings. He said he was or was looking for it.

Custodian banks have a department that manages client assets in exchange for fees.

A London-based banker said he spoke anonymously to respect the confidentiality of large global fund clients and is in weekly contact with senior Citibank Moscow executives on the status of the custodian business. I did.

Customers were waiting to trade Russian stocks when the Moscow Exchange (MOEX) reopened, sources said, but needed the peace of mind of deploying western custodians.

Citigroup executives said they would serve customers as long as sanctions were allowed, sources said.

According to Citi’s knowledgeable sources, major US and international companies in Moscow use their banks, and blocking their customers could compromise their relationships with them. Other bankers have said it is important for the industry for key player Citi to continue its business in Moscow.

Citigroup declined to comment.

A second New York-based banker said he had asked Societe Generale to guarantee that they would “stay on the ground” so that his bank could meet its custody obligations to its customers. Societe Generale executives provided assurance that they would, at least in the short term, sources said.

Rosbank (ROSB.MM)’s French parent company, Citigroup and Societe Generale, are working in Moscow as part of a radical program of Western sanctions aimed at economically isolating Russia after the invasion of Ukraine. We have already announced plans to dramatically reduce the number of people.read more

Both banks have stated that they will assist clients in the complex task of eliminating or reducing their exposure to Russia, and that withdrawals will take time.

However, neither has issued an official statement on the long-term status of the Castdian service, and some clients are nervous about the future.

A spokeswoman for Societe Generale said in an email statement that “businesses in Russia are carried out with the utmost care and choice while supporting historic customers.”

“We strictly comply with all applicable laws and regulations and are enthusiastic about taking the necessary steps to enforce them as soon as international sanctions are published,” said Societe Generale.

The bank refused to comment specifically on its custody business in Russia.

JPMorgan Chase & Co (JPM.N) also offers a similar storage service from the Moscow outpost. Banks are receiving inquiries from customers seeking assurance that storage services will continue to be provided, according to sources familiar with the matter. Previously, it stated that it would continue to function as a client’s custodian.

The Bank of New York Mellon Corp (BK.N) has also stated that it will continue to provide custodian services in Russia.

Shutout

If a bank decides to suspend its custody service in Moscow, many Western investors who already hold Russian stocks or bonds will have to look elsewhere for a bank that holds those assets. Although there are, it is more difficult to pursue those plans that other investors enthusiastic about taking advantage of financial markets or economic rallies can find when sanctions are lifted.

France’s third-largest bank, SocGen, warned stakeholders on March 3 that it could be deprived of ownership of its business in Russia in a “potential extreme scenario.”read more

Meanwhile, Citi initially said it would run its Russian operations more “limitedly” in the wake of a war that President Vladimir Putin called a “special military operation.”

However, by March 14, it said it would accelerate and expand the scope of its withdrawal by abandoning Russian institutional investors and wealth management clients.read more

In addition to trading services, many Moscow-based custodian teams offer add-ons such as language translations of central bank documents, which are also highly regarded by Western clients, sources said. increase.

The Central Bank of Russia said individually on Wednesday that some stock market trading will resume on Thursday, 33 securities will be traded on the Moscow Stock Exchange for a limited time, and short-term sales will be banned.read more

Banks’ challenges in fulfilling their obligations to Russian customers are becoming more and more challenging, and tightening sanctions could make it even more difficult, with the one-month anniversary of the aggression falling this week.

Russia has set strict new rules for foreigners seeking permission to buy and sell Russian assets, from securities to real estate.read more

Another New York-based banker described the business of ensuring customers to comply with the sanctions associated with holding securities as a “logistic nightmare,” and his company has 20 new compliances in recent weeks. He said he hired staff.

Companies, banks and investors around the world have so far disclosed approximately $ 135 billion in their exposure to Russia, according to a company statement.read more

According to the latest portfolio information available, US asset managers such as Vanguard and Capital Group Companies, Inc. manage franchises of American funds that are popular with millions of moms and pop retirement savers.read more

Report by Sinead Cruise in London, Matt Scuffham and Megan Davies in New York Additional report by Paristosh Bansal in New York Edited by Matthew Lewis

Our Criteria: Trust Principles.