New rules for selecting accounting institutions abroad: Bank of Russia ordinance
From 1 January 2025, when choosing an institution abroad, in which they will account foreign securities, Russian depositories should check its status or its rules for service provision. The creation of depository bridges is necessary for accounting foreign securities accepted for trading in the domestic market, as well as for issuing depositary receipts for foreign assets. The new requirements are set out in the Bank of Russia Ordinance.
It is now permitted to open accounts with a foreign institution if it is either a central depository or an international centralised system for recognising rights to securities or if it settles securities based on the results of on-exchange trading. If a Russian depository’s counterparty does not have such a status, then it should comply with the following requirements.
Such an institution should ensure equality of the amount of securities that it records in the Russian depository’s account and the amount of the same assets recorded in its favour in the institutions account in a higher-level foreign accounting institution. In addition, the law of a foreign state should not provide for including assets kept in the Russian depository's account in the accounting institution’s bankruptcy estate if it goes bankrupt.
The document expands the geography of home jurisdictions of accounting institutions, with which Russian depositories may cooperate. The list of states was supplemented with countries of Asia-Pacific region, Africa, South America, and the Middle East. Concurrently, an accounting institution’s membership in international associations is no longer one of the selection criteria.
The new requirements will help minimise infrastructure risks for the domestic accounting system and enhance the protection of ‘investors' interests.