Transcript ING Commercial Banking Pitchbook Template

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Rouble settlements for
international banks
Practical Aspects
Julia Sergeeva
Payments and Cash Management
ING BANK (EURASIA) ZAO
April 2011
Agenda
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Overview
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RUB Settlements issues
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Liquidity Management Issues
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RTGS : current status and specifics
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Summary
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Overview
Market participants
Counterparts
International brokers
Top 30 Russian banks
Off-shore market
Subsidiaries of foreign banks in Russia
FX spot, FX swaps, XCY swaps, IRS, OIS
Rouble funding
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
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
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RUB Settlements Issues
•Account opening procedure is rather tough
Collecting of documents set
Tax registration
Accounts opening
(from 3 months up to 1 year)
(up to 1 week)
(1-2 days)
Correspondent bank
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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
Payment processing
for Moscow region
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Main principles
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Payments with early CBR shift
Extended cut-off times for same day value settlement
Intraday overdraft facility
Understanding of Currency control rules
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Liquidity Management Issues
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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)
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Generally no distinction between high/low value & urgent/non-urgent payments
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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
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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
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RTGS : current status and specifics
Current status
Specifics of RTGS in Russia
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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
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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
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Summary
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RTGS Functional requirements
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Online settlement over principal RUB NOSTRO
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Instant settlement netting
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SWIFT compatible
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Liquidity management
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ING BANK (EURASIA) ZAO
36 Krasnoproletarskaya Street
Moscow, 127473, Russia
T. +7 495 755 5400
F. +7 495 755 5499
www.ing.ru
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