1. Rouble settlements for international banks
Practical Aspects
Julia Sergeeva
Payments and Cash Management
ING BANK (EURASIA) ZAO
April 2011

2. Agenda Overview RUB Settlements issues Liquidity Management Issues
RTGS : current status and specifics
Summary

3. Overview Market participants Rouble funding
Counterparts
Top 30 Russian banks
Subsidiaries of foreign banks in Russia
International brokers
Off-shore market
FX spot, FX swaps, XCY swaps, IRS, OIS
Top Russian banks and foreign subsidiaries (overnight 3-3.5%, MM up to 3 months)
Foreign banks – limited direct access to local funding
Current issue - Lack of local ISDA
Rouble funding
Trading and Settlements volumes substantially increased
Forecasted increase in volumes in 2011 vs. 2010
Turnover of ING Moscow vs foreign banks around
20 milliards RUB per day
Mostly traded instrument FX spot, FX swaps,
RUB bonds, REPO, derivatives
Volumes are based on ING Commercial Banking activity on Russian market

4. RUB Settlements Issues
Account opening procedure is rather tough
Collecting of documents set
(from 3 months up to 1 year)
Tax registration
(up to 1 week)
Accounts opening
(1-2 days)
Correspondent bank
Russian Tax Authorities
Clearing provider
Special format of RUB payments, including obligatory special (VO) codes for currency control purposes
Manual intervention in RUB payment processing
Main principles
Payments with early CBR shift
Extended cut-off times for same day value settlement
Intraday overdraft facility
Understanding of Currency control rules
Payment processing
for Moscow region

5. Liquidity Management Issues
Majority of commercial and interbank payments are processed with the 4th and the 5th batches when interbank currency market is already inactive
Wide variety of bank internal crediting procedures – from crediting all 5 batches with the same value to crediting all 5 batches with next business day value
CBR does not pay interest on an overnight credit balance on the correspondent account of a local bank
CBR offers secured overnight loans, backed with certain government debt securities, however, the interest rate (re-financing rate) is relatively high at the moment: 8.00% (as of February 28, 2011)
Generally no distinction between high/low value & urgent/non-urgent payments
Cover payments are not possible for RUB as it contradicts Russian legislation
No back value allowed, while the fine for non-delivery of RUB funds (for interbank payments) is usually as high as a double re-financing rate
Necessary limits and documentation shall be in place (either Master Agreement or ISDA) to start interbank FX trading
Overdraft facility for non-resident banks
available upon signing of the special agreement;
limits imposed onto local banks offering overdrafts via risk management requirements of CBR.
No true cash pooling and sweeping facilities

6. RTGS : current status and specifics
The main liquidity is still concentrated in the Batch-Based System (BBS)
Mostly used for early payments to MICEX Settlement House
Since August 2010 all domestic Banks are joined to RTGS system
Currently used by about 3045 credit organizations (including its branches)
Volume represents approximately 25% of the total RUB payment settlements
No interest in using RTGS System
Specifics of RTGS in Russia
Meant specifically for low-volume high-value payments
Not duly harmonized with the currently used CBR BBS
Labour-intensive and time-consuming payment processing
Non-compatibility with international SWIFT standards
High dependency on the possibility and willingness of the local recipient bank to process the payment via RTGS system
No clear definition of control mechanism for liquidity management
Not sufficiently quick and reliable at the current stage

7. Summary RTGS Functional requirements
Online settlement over principal RUB NOSTRO
Instant settlement netting
SWIFT compatible
Liquidity management

8. ING BANK (EURASIA) ZAO
36 Krasnoproletarskaya Street
Moscow, , Russia T F