The international isolation of Russia's financial system is growing.
VTB, which came under Western sanctions in February, paid the owners of one of the bank's four Eurobond issues a $ 52 million coupon, although the securities were issued in foreign currency, so the payment is unlikely accepted. About payment in rubles reports Russian edition “Vedomosti” with reference to the member of the board of VTB Dmitry Pyanov.
The bank made payments on April 15 in the amount of 4.2 billion rubles. This is one of the four issues of VTB's Eurobonds made before 2014, because after Russia's annexation of Ukraine's Crimea, sectoral sanctions banned VTB from issuing long-term foreign currency bonds.
Of these papers, three issues were made in dollars and one in Swiss francs. Now the sanctioned VTB has come under blocking sanctions and has been completely cut off from the foreign payment infrastructure in dollars, so it can not make payments in foreign currency.
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It will be recalled that Russian Rosselkhozbank (RSGB) , which is under sanctions, failed to pay the dollar coupon on time on April 16 Eurobonds.
Earlier, another bank, Radkombank, which is under US sanctions, announced that the restrictions do not allow it to service debt obligations, including the payment of coupons for four Eurobond issues.
Banks' defaults on foreign liabilities mean a return to the local, domestic, financial market, not related to the international financial system. Russia's foreign exchange earnings channel will continue to decline and will be linked only to the export of raw materials.
Due to sanctions, banks will lose the ability to finance economic growth and the economy using foreign exchange instruments.
Tensions are expected over how foreign currency deposit commitments will be met. Most likely, banks will offer Russian depositors to convert foreign currency deposits into ruble. REPO (this mechanism is used by the Central Bank for short-term loans to banks secured by securities). At the same time bank loans amounted to trillions of rubles.
