Sinead Cruise, Carolina Mandl

WASHINGTON/NEW YORK – Russian banks and companies, including BNY Mellon (NYSE) Deutsche Bank (ETR:), Citigroup JPMorgan (NYSE 🙂 and JPMorgan(NYSE 🙂 may make money if Moscow decides to remove Russian company depositary receipts foreign exchanges. Two people who are familiar with this matter say they could be able to profit.

This is because bank issuers that depositary receipts charge investors for cancelling products can legally make this a huge win.

There is no way to know how much banks or companies can make, nor if they will be charging fees. This could anger investors who feel it unfair considering the unusual circumstances that have been created by Russia’s invasion in Ukraine.

According to Reuters calculations, however, fees can potentially amount to hundreds of millions of US dollars based upon fee data from the source.

Moscow has begun to prepare to withdraw Russian company depositary receipts foreign exchanges to be delisted and converted into local Russian securities, in an attempt to decrease foreigners’ control of these businesses.

A bank issues depositary receipts, which are certificates that represent shares of foreign companies traded on the local stock exchange. Investors can use them to explore overseas stocks within their geographic and local time zones.

Over 30 Russian company depositary receipts are available, including Gazprom (MCX), Rosneft. Lukoil, Norilsk Nickel, and Rosneft. These were issued by BNY Mellon. Deutsche Bank. Citigroup. JPMorgan.

Standard agreements allow for the cancellation of depositary receipts by either the issuer or investor. The investor usually receives cash through the sale of the underlying securities, but they can also take custody.

Two sources stated that banks charge an administration fee of typically $0.05 per receipt. This may be split with companies.

The banks may have to cancel Russian depositary receipts if Moscow is removed from the Russian list. According to three sources, banks could charge fees even if they were forced to.

According to Reuters, this means that an investor with Rosneft’s 150 million depositsary receipts, representing the same number shares, could end up paying $7.5million in cancellation fees.

It could be difficult for some banks to transfer funds to companies because of the Western sanctions.

Investors disagree with this decision. According to one global asset manager, if Russia is allowed to delist its stock exchanges there shouldn’t be any fees. Investors would not have any choice. However, the other sources state that banks must still cover these costs.

BNY Mellon and Deutsche Bank declined comment. JPMorgan, Citigroup, JPMorgan, JPMorgan, and JPMorgan did not respond. Russian companies declined to respond to Reuters’ emails asking for comments.

MARKET FREEZE

The Western sanctions had a devastating effect on Russian stock markets by February end. Moscow’s exchange was closed, and the Russian central banking banned foreigners from exchanging shares from their custody accounts. The Russian central bank also prohibited foreigners selling Russian shares.

Banks were almost unable cancel receipts when investors asked.

BNY Mellon and Citi have begun processing cancellations again after the curbs were lifted on custodians. However, foreign banks can still not sell shares so investors must instead take care of them. Investors need a Russian account to do this. Many don’t.

Three people believe that investors may hold on to their receipts while they wait for the right time.

Investors are concerned about Russia’s forthcoming de-listing legislation.

Investors are concerned about the cancellation fees and what happens if they cannot open local custody accounts.

JPMorgan sent a note to its clients stating that clients might be allowed to open Russian accounts if the new law passes.