Gref favors simplifying access for foreign issuers to Russian market
MOSCOW. Oct 31 (Interfax) - It is necessary to simplify access for foreign issuers to the Russian market, and Russian companies should be permitted to issue Eurobonds directly, instead of through special purpose vehicles (SPV), President and Chairman of the Board of Directors of Sberbank of Russia German Gref says.
"It is necessary to simplify the procedure of access for foreign issuers to the Russian financial market, as well as to permit Russian companies to directly place Eurobonds, without using SPV companies," Gref is quoted in a bank statement as saying after a meeting of the International Advisory Board on the creation of an International Financial Center in Russia.
One of the biggest Western banks is currently showing interest in placing securities in rubles, Gref said.
It is also necessary to make strong efforts to recover investors' trust in Russia and its financial market, he said.
"Russia is in one of the best places in terms of its government finances and level of government debt. But a low level of trust on the part of investors prevents the realization of our country's potential. It is necessary to make maximum efforts to recover this trust," Gref said.
Gref proposed considering the abolition of taxes on coupon yields at the federal and sub-federal level for non-residents, improving the range of debt products, and creating special federal agencies to manage state debt.
"It is proposed to introduce changes to the legislation on securities, which will permit issuers to directly place Eurobonds," he said at the meeting.
Currently, Russian borrowers are forced to service foreign loans through companies specially created to solve the accompanying numerous regulation and tax issues. "As a result, this market is concentrated on offshore jurisdictions, which causes investors, as well as the reputation of issuers and the Russian financial market in general, to suffer," Gref said.
During the meeting, Gref made seven proposals for improving the regulation of Russian issuers' placement of Eurobonds. He asked President Dmitry Medvedev to include them in a list of the president's orders.
After the meeting, presidential aide Arkady Dvorkovich told journalists that all of the proposals made during the meeting would be considered and that some of them would be implemented in the future.
At the same time, Mikhail Galkin, a debt market analyst from VTB Capital, says that European and American investors are already accustomed to the transaction structure in Russian companies, in which the Eurobond issuer is an SPV. Abolishing taxation on cross-border interest payments would be positively perceived by investors with new markets for Russian companies - for example, Asian investors.
"On the one hand, those who have been investing in developing markets for over ten years are already used to such a structure and have no problem dealing with it. But for new investors, for example on Asian markets, such a scheme will raise questions. If we plan to expand the investor base for Russian issuers, it would be good to remove that discomfort, cancelling taxes on interest payments on Eurobonds," Galkin told Interfax. But imperfections in the tax system are not the priority problem to be solved, he said.