European banks joined US banks in recently returning to exposure to Russian corporate and government bonds after the US Treasury Department allowed investors to exit positions in the market.
In June, trading in the Russian debt market came to a halt after American investors were prohibited from buying bonds on the secondary market. But on July 22, the Office of Foreign Assets Control (OFAC) gave investors three months to close positions: during this time, banks are allowed to organize, execute transactions for US citizens, and carry out settlements on them, even if this involves the purchase of securities.
European regulators have also relaxed requirements to give banks the opportunity to help clients get rid of Russian bonds.
UBS, Barclays and Deutsche Bank have resumed closing out positions for clients, according to people familiar with their actions, after JPMorgan Chase, Bank of America, Jefferies and Citigroup did the same.
Other European banks, including Credit Suisse and HSBC, have not yet returned to the market because their risk management rules do not allow it, people with knowledge of their positions say.
Before Russia’s invasion of Ukraine, nearly $40 billion worth of Russian government bonds were traded on the market, about half of which were held by foreign investors.
All banks declined to comment, but according to people briefed on their actions, their return to the market is not due to a desire to make money, but to allow clients to close positions in accordance with sanctions rules. An employee of one bank that has resumed trading says:
This is done primarily for clients who want to exit positions. The trading volume here is not particularly remarkable.