(Bloomberg) -- The Russian central bank has banned coupon payments to foreign owners of ruble bonds known as OFZs in what it called a temporary step to shore up markets in the wake of international sanctions.
The Bank of Russia issued the instruction to depositaries and registries as part of a raft of measures announced this week that included a freeze on local security sales by foreigners. It was unclear how long the ban would last.
“Issuers have the right to make decisions on the payment of dividends and the making of other payments on securities and transfer them to the accounting system,” the central bank said in an emailed reply to questions. “However, the payments themselves will not be made by depositories and registrars to foreign clients. This also applies to OFZ.”
The decision was taken to “avoid mass sales of Russian securities, the withdrawal of funds from the Russian financial market and to support financial stability,” it said.
Read more: Bank of Russia Reassures on Debt After Putin’s Sanctions Gambit
With as much as half of its foreign reserves frozen abroad by sanctions aimed at punishing the Kremlin for invading Ukraine, the Bank of Russia said Monday it would harden capital controls with a ban on transferring foreign currency abroad. While initially it clarified that the step wasn’t aimed at stopping the servicing of debt, some investors and economists said the phrasing of the decree could amount to a default.
“A potentially weaker willingness on the part of the Russian government to service its debt on time and in full, raise the probability of more severe credit outcomes for foreign holders of Russian debt securities,” Moody’s Investors Service said in an statement.
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