Russia: Rouble held back by settlement
The news that spot rouble trades have taken place electronically on EBS and LavaFX between Russian and foreign banks has been taken by some observers as proof that the currency has taken a significant step towards full convertibility. However, the deals mask the fact that Russia’s settlement system is still a real impediment to the rouble’s wider acceptance and is harming the government’s hopes that it will one day be accepted as a reserve currency.
"Russia has ambitions to become a G8 and reserve currency. We have serious doubts about this aim unless Russia reforms its settlement system. The issue is not a technological one but a political one"
Market participants are keen to address the settlement problem. "At the start of the year, we met with the Russian central bank and discussed settlement. This is seen by many as the biggest issue in the market," says Darryl Hooker, emerging market manager at Icap Electronic Broking. Following this meeting, Icap hosted a forum in London in April attended by six non-Russian banks, including ABN Amro, Citi, Barclays, Société Générale and RZB.
"With the first forum, we tried to address the simple question of whether settlement really was the issue. The consensus was that it was prohibiting the rouble market’s expansion," says Hooker.
The size of this consensus was illustrated by the popularity of a second forum Icap held in Moscow on September 18 in conjunction with the Moscow Interbank Currency Exchange (Micex). "We initially invited seven local banks and five foreign banks, but we had over 50 delegates participate," says Hooker.