Thomas Murray - Impact of Russia’s Invasion of Ukraine on the Capital Markets of Ukraine and Russia

Impact of Russia’s Invasion of Ukraine on the Capital Markets of Ukraine and Russia

Impact of Russia’s Invasion of Ukraine on the Capital Markets of Ukraine and Russia

London | 03 March 2022

Ana Giraldo
Chief Risk Officer
Thomas Murray


On Thursday 24th February 2022, Russian forces invaded Ukraine. Global stock prices tumbled on that day, while oil prices surged increasing inflationary pressures. Since then, volatility has remained high in most financial markets.

Current position:

Ukraine - Market Asset Safety Rating B with Negative outlook

Russia - Market Asset Safety Rating B with Negative outlook



The chronological impact on Ukrainian and Russian capital markets and financial market infrastructures

Ukraine - Initially, Ukraine was the most impacted market after the country’s President Volodymyr Zelenskyy declared martial law.

  • 24th February - Ukraine’s National Securities and Stock Market Commission (NSSMC) suspended the placement, circulation, and redemption of all securities from 11.00 am (Kyiv time). Trading and clearing activities were suspended and the National Depository of Ukraine (NDU) was instructed to ensure the back up of all the information regarding the accounts and securities held as of 11.00 am.
  • The National Bank of Ukraine (NBU) had to suspend the foreign exchange market and fixed the official exchange rate for 24th February 2022. In addition, cross-border operations with foreign currencies were suspended.

The market has remained closed for secondary market transactions since then. There is uncertainty as to when the market will be able to re-open. Asset safety has been compromised as investors are not able to access their assets. This could have significant implications for the capital markets. Investors with stocks in Ukraine are not able to sell them or receive income or dividend payments. In addition, since settlements are not taking place, any trades undertaken on Tuesday and Wednesday last week (22nd and 23rd February) remain unsettled. Since no clearing and settlement activities are occurring, revenues at NDU are likely to diminish with some implications on its financial risk. In addition, local companies are not able to get any financing through the primary and secondary market.

Russia - Russia has been severely impacted as the war has continued to evolve and economic sanctions have been imposed on its economy.

  • 24th February - The Moscow Exchange remained open on Thursday, although it had to activate its discrete auction mechanism to control volatility. The morning and evening trading sessions were cancelled, and the Central Bank (CBR) announced a series of measures to maintain the stability of the financial market and its liquidity.
  • 25th February, stock prices bounced back after investors perceived the sanctions against Russia to be not as severe as they had expected.
  • 28th February - Clearstream Banking’s suspended Bridge settlement for all Russian domestic securities in all currencies. This will have a severe impact on the financial system. CBR suspended equity trading at the Moscow Exchange for three consecutive days, due to heightened volatility from additional and tougher sanctions on Russia. The development came after CBR raised its key policy rate to 20% from 9.5% in an emergency move to contain the risk of further depreciation of the Russian Rouble (RUB). The RUB fell as much as 40% in offshore markets after Western nations announced additional sanctions against Russia over its invasion of Ukraine. Key Russian banks were removed from the SWIFT interbank messaging system and the assets of Russia’s Central Bank were frozen, limiting the country’s ability to access its overseas reserves. President Biden’s administration banned US individuals and companies from doing business with CBR, the Russian National Wealth Fund, and the Ministry of Finance.

In response to the sanctions, CBR ordered local custodians and registrars to stop the execution of settlement instructions on securities held by non-resident investors, as well as processing income payments linked to them.

What has been Thomas Murray’s Response?

Thomas Murray has been closely monitoring the situation as sanctions and other actions are published.

Ukraine - We immediately reduced the country risk score for Ukraine resulting in a downgrade in the Overall Risk Assessment for Ukraine from A- to BBB and further to B as additional measures were announced in our Market Asset Safety Risk Assessment (MASRA). The MASRA profiles provide a comprehensive overview of the factors affecting client assets in investment markets. This includes elements of country risk that could directly or indirectly trigger loss of principal, affect local market practices, and alter risks in the capital market infrastructure and sub-custody arrangements affecting the safekeeping, transfer, and servicing of underlying assets.

1st March - the outlook for the overall grade for our NDU risk assessment was revised to Negative as well as the outlooks for Asset Safety, Liquidity, and Financial Risks following the restrictions in the FX market and the market closure. A similar approach was taken for NBU Depository with downgrades in the outlooks for Asset Safety, Liquidity, Financial, as well as the Overall risks. Operational Risk has been put On Watch.

The ratings for local sub custodians have been maintained, although the Asset Safety, Asset Servicing and Financial risk outlooks as well as the Overall were changed to negative. Further downgrades may take place as news from the conflict emerges.

Russia - the MASRA rating has been downgraded to B from A based on the latest measures implemented by CBR.

Following the instruction from CBR to local custodians and registrars (including NSD) to suspend the processing of settlement instructions and income payments for non-resident investors, the Asset Safety Risk and Asset Servicing risk assessments have been reduced to B for all local entities monitored by Thomas Murray (including Financial Market Infrastructures and local custodians). These changes have had an impact on their Overall grades. Outlooks have also been placed on Negative. Finally, Sberbanks’ and Unicredit’s financial risk ratings were lowered to BB with Negative Outlook as the banks’ situations have deteriorated following massive deposit withdrawals. Operational Risk has been put On Watch following the removal of some key banks from the SWIFT network.

Our Capital Market Infrastructure Risk Ratings (CMIRAs) for Russia and Ukraine have been reviewed and downgraded to B on the basis that foreign investors are not able to access their assets.

We will continue to monitor the situation as new events emerge and inform clients accordingly via Thomas Murray’s newsflashes. We are committed to making the necessary adjustments to the information and the ratings in our reports based on these developments to reflect the risk situation in both Ukraine and Russia. Additional updates will be issued as the situation evolves.