Home NewsEconomy News U.S. Treasury gives green light to Russian default insurance payouts By Reuters

U.S. Treasury gives green light to Russian default insurance payouts By Reuters

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U.S. Treasury gives green light to Russian default insurance payouts By Reuters



© Reuters. FILE PHOTO: The U.S. Department of the Treasury is seen in Washington, D.C., U.S., August 30, 2020. REUTERS/Andrew Kelly/File Photo

WASHINGTON/LONDON (Reuters) – The U.S. Treasury Department on Friday issued a special waiver that allows investors who hold Russia’s default protection policies, known as credit default swaps, to receive payments.

The normally direct CDS payment process was thrown into disarray in June when Washington said its sanctions on Russia represented an outright ban on buying Moscow’s debt.

Investors who buy CDS contracts typically hand over the underlying bonds to a bank or fund that sells them CDS in the event of a default. It traditionally involved an auction to determine the price, but under sanctions, the transaction has actually become illegal.

“OFAC has issued two general licenses (exemptions) to help U.S. and other global investors exit their exposure to Russia more cleanly,” a Treasury spokesman said.

The move also empowers financial institutions to “facilitate, clear and settle” newly authorized transactions, Treasury website https://home.treasury.gov/policy-issues/financial-sanctions/faqs/added/2022-07-added 22 indivual

Analysts estimate that about $2.5 billion worth of Russian sovereign debt CDS has been held back by these issues.

Russia had previously been declared a default last month, although it was already in trouble in May for failing to pay an additional $1.9 million in interest accrued on earlier overdue payments.

The confusion has investors lobbying Washington to earn Friday’s stipend.

It authorizes, along with another “license,” until Oct. 19, to deal in securities issued by Russian entities under agreements concluded prior to June 6.

“It is sensible for the Treasury to grant the license and serves the purpose of CDS and the reason CDS investments exist,” said Jay Auslander, a partner at law firm Wilk Auslander.

“From a financial standpoint, this is good news and what we want to see.”

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