(Bloomberg) – Russia’s central bank has banned coupon payments to foreign holders of ruble bonds known as OFZ in what it called a temporary step to shore up markets in the wake of international sanctions.
The Bank of Russia issued the instruction to depositories and registries as part of a series of measures announced this week, including a freeze on sales of local securities by foreigners. It was unclear how long the ban would last.
“Issuers have the right to make decisions on the payment of dividends and make other payments on the securities and transfer them to the accounting system,” the central bank said in an email response to questions. “However, the payments themselves will not be made by depositories and registrars to foreign customers. This also applies to OFZ.
The decision was taken to “avoid massive sales of Russian securities, the withdrawal of funds from the Russian financial market and to support financial stability”, he said.
Read more: Bank of Russia reassures on debt after Putin sanctions game
With up to half of its foreign exchange reserves frozen abroad by sanctions aimed at punishing the Kremlin for invading Ukraine, the Bank of Russia announced on Monday that it would tighten capital controls with a ban on transfer foreign currency abroad. While he initially clarified that the measure was not intended to stop debt servicing, some investors and economists said the wording of the decree could be a flaw.
“A potentially weaker willingness on the part of the Russian government to repay its debt on time and in full, increases the likelihood of more severe credit outcomes for foreign holders of Russian debt securities,” Moody’s Investors Service said in a statement.
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