What’s left to say?

Following the Russian invasion of Ukraine, Richard Schwartz outlines the questions Global Custodian will be looking to answer when it comes to SWIFT, market infrastructure and sub-custody in the coming days.

When there is big news, covered by all major news outlets – and discounting some of the social media froth – what is the role of a B2B publication like Global Custodian? What can we tell our readers about SWIFT, Russia and Ukraine that adds anything to what they’re reading every five minutes on their news feeds of choice? 

However churned up we might be about the situation itself, we’re unlikely to be able to bring breaking news and comment. Rather, over the next few days, we’ll be looking to answer the following questions, inter alia: 

  1. The possibility of Russia being denied access to SWIFT is a subject of much public comment. SWIFT, however, is not government owned. It is a co-operative. Its shareholders are banks around the world. It is governed by a board of directors representing its various national and regional member groups and is overseen by the G10 central banks with National Bank of Belgium being the lead in that regard. If there are political demands to expel or suspend Russia from SWIFT, how would such action be implemented? 
  2. What is the position of non-bank financial market infrastructures such as CSDs? The European Central Securities Depositories Association (ECSDA), of which the National Depository of the Ukraine (NDU) and The National Settlement Depository of Russia (NSD) are both associate members, has published the following communique: “On 24 February 2022, the National Depository of Ukraine informed ECSDA that ‘due to the acts of military aggression by the Russian Federation against Ukraine’, the application of the martial law in Ukraine from 24.02.2022 and the relevant decision of the National Commission on Securities and Stock Market, the CSD operating hours on that day have been reduced to 11:00 am local time. From that moment and until a different decision is taken, the Ukrainian National Securities and Stock Market Commission temporarily suspended the placement, circulation, and redemption of all securities, as well as operations in the depository accounting system and clearing systems of persons conducting clearing activities. This is with the exception of the operations required by the National Bank for monetary policy and the Ministry of Finance public debt service.’ 
  3. Among the Russian banks now subject to sanctions, at least one is a sizeable sub-custodian. How do sanctions affect the relationship between such institutions and their cross-border clients? Are depositary receipts subject to the same sanctions?

At the moment, we have no clear answers to share. Hopefully that will change over the next few days.