Request for mutual offset between Sber, UK subsidiary still hung up at OFSI

16 May 2023 11:48

Request for mutual offset between Sber, UK subsidiary still hung up at OFSI

MOSCOW. May 16 (Interfax) – The proposal made several months ago to carry out a mutual offset of liabilities between leading Russian lender Sberbank and its UK subsidiary, which is under external administration, has still not received a positive or negative answer from the United Kingdom’s sanctions regulator.

Lawyers representing the special administrators of Sberbank CIB (UK) Ltd, which in the process of winding down operations, asked HM Treasury’s Office of Financial Sanctions Implementation (OFSI) back in the fall of 2022 for permission to offset some assets located in Russia against the parent bank’s claims against the company.

“The status of the Company’s Net Settlement Proposal application to OFSI remains outstanding, at the time of reporting, and no feedback has been received to date,” the administrators said in their latest report, which was prepared on April 28.

The goal of this proposal is to offset company funds frozen in Russia against money owed to Sberbank as Sberbank CIB (UK)’s largest creditor. Sberbank CIB (UK)’s net obligations to Sberbank total $95 million. The parent bank is holding $107 million of the UK division’s cash. This money, which cannot be returned to Sberbank CIB (UK) due to current sanctions, is the subject of the proposed mutual offset, the report said.

Sberbank CIB has a portfolio of securities held at Euroclear, Citibank and Russia’s National Settlement Depository (NSD). These securities comprise equity holdings in Russian, European and U.S. entities, exchange traded funds, Russian sovereign and corporate bonds, ADRs and GDRs issued mainly by Chinese and Russian companies, and holdings in equity-linked structured notes issued by major banks.

The assets with NSD cannot be accessed due to existing sanctions. The administrators tried to sell the assets held with Euroclear, but they were blocked in July 2022. Approval was received from the Belgian Finance Ministry to allow the sale of assets worth about 5.4 million euros held with Euroclear in December 2022. The sterling equivalent of GBP4.8 million was received in March 2023.

The release of the equivalent of GBP12.6 million in cash U.S. dollars held with Euroclear will require a specific license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). The Sberbank CIB administrators plan to seek such a license, the report said.

The United States imposed blocking sanctions against Sberbank in April 2022. These sanctions include a freeze on the bank’s assets in the U.S. and prohibit U.S. citizens from conducting any transactions with the bank. Some other countries, including the UK and the European Union, later imposed similar restrictions against Sberbank.