The Moscow exchange
Photo: Ekaterina Kuzmina/RBC
Initiative Masuri to provide direct access by corporations to the money market caused the dissatisfaction of the banks. They fear that the rising cost of raising funds will have a negative impact on their margins
The cost of raising funds from corporate clients for banks may rise in connection with the opening of the Moscow stock exchange in 2017 direct access companies on the stock exchange REPO market, told RBC several treasurers of large banks.
At the beginning of 2017, the exchange plans to allow about 75 Russian corporations directly to money market trading platforms. We are talking about a REPO with a Central counterparty, that is, when market participants do not Transact with each other and with the National clearing centre (NCC), which ensures fulfillment of obligations, announced October 27, managing Director for cash and derivatives markets of the Moscow exchange Igor Maric.
“It will be very painful. Rates for short-term liquidity will increase by 0.5 percentage points,” commented the Treasurer of the Bank from the top 5 consequences of the admission of corporations on the cash market. According to him, it is likely that the company would prefer to allocate funds not in Bank accounts and on the REPO market, and banks will have to follow the liquidity on the exchange. Based on the difference between the return on deposits and interest rates on REPO operations, we expect that the cost of funding for banks could grow at 1-1,5 percentage points, says the Treasurer of one of the state banks. This, according to the banker, will inevitably impact on the margin and in the long term can lead to more expensive loans.
“The exchange slightly grow revenues, and the banks will just pay more for fundraising. This will put additional pressure on their margins” — agrees chief economist “PF Capital” Evgenie Nadorshin.
The Central Bank does not comment on the possible rise in costs for banks. Organization direct access of corporations to a money market allows banks and other traders to obtain additional stable source of liquidity, noted in a press-service of the Central Bank.
However, the exchanges do not hide the fact that companies will be more profitable to place money on the exchange. The service has advantages in comparison with Bank deposits is primarily due to more favorable interest rates, said earlier Maric. The exchange also noted that the operations on the monetary market do not bear risk for corporations because the funds in the form of deposits will be placed in the NCC. In turn, the party wishing to raise money on the market, NCC must provide a security (stocks, bonds and other securities), under which the Central counterparty will give him the credit.
Analysts find it difficult to assess how much of the corporate funds may hit the market after the innovation. On the stock exchange predict that the flow of funds corporations will increase the turnover in the REPO market by 20%. Now the volume of open positions in REPO operations with the Central counterparty, according to Maric, is about 1 trillion rubles. Thus, the banking sector could lose a total of 200 billion rubles. taking into account the fact that, according to the Central Bank on 1.10.2016, on settlement accounts of banks was about 8.9 trillion of funds, the outflow of liquidity from the banks doesn’t look significant.
The head of the dealing center of Metallinvestbank Sergey Romanchuk said that the volume of transactions may be significantly higher. In any case, the possibility of direct access to the exchange for corporate clients of banks will put pressure on margins. “The opportunity to place money in a REPO may be for corporations, an instrument of pressure on banks. Clients can simply put a condition: or you we raise for use of the funds, or attract liquidity through the NCC,” the fear of the banker.
The risk to NFCs
Bankers believe that the expansion of the list of participants in the REPO market will increase the risk to National clearing center, which is responsible for the execution of transactions with own funds. For example, if the counterparty does not return the company’s lender obtained the funds, regardless of the amount of collateral in the transaction, the NCC is obliged to pay her back. The growth of operating risks for the Central counterparty of Moscow exchange market participants pointed out during the discussion held in the framework of the Council of the stock exchange on Monday, October 31. One of the items on the agenda was the issue of corporate involvement in the transactions in the money market, told RBC two participants of the discussion.
“Now the risks are distributed between the NCC and several major banks, liquidity providers to the market. There are fears that because of the admission of corporations to market concentration risks on the Central counterparty will increase, is a negative factor for the participants”, — said the head of Treasury Bank of the top 50. “The increase in volumes redistributed through the NFPs liquidity in the money market requires close attention to operational risk management and market risk the valuation of collateral. This concern is shared by the Bank of Russia”, — told RBC in the press service of the Central Bank.
According to the rating Agency ACRES, the total assets of the NCC, is exposed to market risk, 2.5 times the amount of fixed capital. “This puts pressure on the aggregate risk profile of NCC, but in the structure of the rating kompensiruet minimal credit risk as a result of default of counterparties. This is achieved through a well structured system of risk management, multiple levels of protection (including allocated capital) and the concept of localization of defaults”, — stated in the review of the Agency.
The analysts noted acres of critical systemic importance of the NCC for the Russian financial market. In their opinion, the default of the NCC may lead to a systemic crisis in most segments of the Russian financial market that will have a significant negative impact on financial stability and the economy of the state as a whole.
Allowing big corporations in the money markets, the exchange does not create new risks, but on the contrary, reduce existing systemic risks, said Maric. He notes that corporations bear the risks in banks. “The exchange participants only take the risk of a Central counterparty, which, unlike banks, does not take credit risk, and transformerait it in the market using the mechanism of “payment against payment” and margin,” he says.
“As it is supposed to be admitted on the corporate cash market only in the mode of a net creditor, then the NCC and Moscow exchange the credit risk of corporations will not arise”, — consider in Bank of Russia.
Chief analyst of Sberbank Mikhail Matovnikov indicates additional risks for companies and banks placing their funds in the money market. “Don’t forget about the settlement terms on the exchange, the need to withdraw and add funds to the market, imperfect liquidity of many instruments, the need to Deposit funds in exchange for settlement,” he says. The expert reminds that companies often have the same settlement terms, for example, on taxes. “During these periods, they can increase the volatility in the market, if will begin to sell securities to pay, e.g. income tax. This increases the risk of losses for companies,” says Matovnikov.
Inconvenience may arise and, if necessary, resources. “In the case of the Bank you can always negotiate, what can be said about the NCC,” says the Director of the Treasury of PSB Dmitry Sprinkles.
Another claim of the banks to Mosberg is that trading platform acts as a de facto competitor in the fight for clients ‘ funds. “The proposed innovation does not create new tools, does not attract new customers, but is aimed at the section of the existing pie,” — says Romanchuk. “This tool will not have a direct impact on liquidity, as banks themselves can act as borrowers in this scheme,” said RBC in the press service of VTB. “The exchange will be one counterparty for such companies along with banks, with whom they now work,” confirms the arguments of the bankers Maric.
Michael Matovnikov indicates that for large banks emerging competition with the exchange creates incentives for the development of the OTC market. The first attempts in this direction banks are already doing. In particular, said the head of Sberbank CIB Igor Bulantsev, at the end of March the Bank launched a trading platform Sberbank Markets, which allows participants to access the liquidity of the savings Bank. According to the banker, today it connects more than 70 credit institutions, and in 2017 it is planned to translate this solution to all clients of Sberbank CIB located in Russia.
“MBK and REPO transactions in the electronic trading platform Sberbank Markets will be available later. While members have access to FX transactions and currency derivatives”, — said the press service of Sberbank CIB. In the near future through this trading platform, enterprise customers will be able to place short-term deposits.