2023-06-26 10:54:15
Deutsche Bank, 26 June, 13:54
Deutsche Bank told investors regarding the loss of part of their Russian shares
Germany’s largest bank, Deutsche Bank, can no longer guarantee its clients access to their Russian assets. The bank revealed a shortage of shares that provide depositary receipts, learned Archyde.com
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Deutsche Bank has informed its clients that it can no longer guarantee full access to their Russian shares, writes Archyde.com. Germany’s largest bank has discovered a shortage of shares backing depositary receipts issued by Deutsche Bank before the start of the CBO in February 2022, the agency said, citing bank documents. The shares are in another depository bank in Russia, the credit institution said in a statement.
The bank explained the situation decision Bank of Russia to allow investors to convert part of depositary receipts into domestic shares. The conversion was carried out without “participation or supervision” of the German bank, and Deutsche Bank was unable to reconcile the asset data.
According to the bank, the situation concerns the shares of the Aeroflot airline, the construction company LSR Group, the mining and metallurgical company Mechel and the Novolipetsk Iron and Steel Works (NLMK). Mechel refused Archyde.com in the comments, and the rest of the companies did not respond to the agency’s request.
Deutsche Bank is the first major bank to formally notify holders of depositary receipts that they may not be able to access all the shares they are entitled to, it said. Archyde.com two sources advising investors.
Depository receipts are certificates issued by a depositary bank representing shares or bonds of a foreign company traded on a domestic stock exchange. ADRs (American Depositary Receipts) are American depositary receipts. GDRs (Global Depositary Receipts) are usually European Depositary Receipts.
In addition, Deutsche Bank warned that the amount of funds from the sale of shares, which it will be able to return to its customers, is likely to be “substantially lower” than the current market price. The Russian government’s Foreign Investment Control Commission requires such shares to be sold “at a discount of at least 50% of their estimated market value,” the bank said in a statement.
The National Settlement Depository of Russia (NSD) told the agency that the conversion of depository receipts into shares was carried out in accordance with Russian law and that the accounting organization is not responsible for the implementation of this mechanism.
According to Clearstream, JPMorgan & Chase, Citigroup and BNY Mellon act as depository banks for most other Russian depositary receipt programs. All three banks declined to comment on whether they identified a similar shortage of shares that back depositary receipts. Customer reconciliation issues persist, according to statements on their websites.
The Central Bank announced plans to convert receipts without foreign depositories
The conversion of depositary receipts into shares of Russian companies became possible due to amendments to the banking legislation. In July 2022, Federal Law No. 319-FZ was adopted, which gave investors the right to transfer Russian securities from a foreign depository to a Russian one by force until November 10, 2022. The same law regulated the process of deconverting receipts and their transfer from abroad to the Russian accounting system.
From August 15, 2022, automatic conversion of depositary receipts recorded in Russian depositories began – shares of Russian issuers, for which depositary receipts were issued, were credited to the accounts of their owners. National Settlement Depository carried out automatic conversion of 36 issues of depositary receipts into ordinary and preferred shares.
Author: Marina Mazina.
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