German banking group Deutsche Bank has informed its clients that it can no longer guarantee full access to their Russian shares, a new example of the problems facing investors around the world in returning investments made in Russian companies, Reuters reported, citing Agerpres.

In a message sent by Deutsche Bank on June 9 and seen by Reuters, Germany’s largest bank told its clients that it had discovered a flaw in the security mechanisms under which the bank issued certificates of deposit before the invasion of Ukraine.

These shares were stored in Russia in another custodian bank. In a circular sent to clients, Deutsche Bank attributed the shortfall to a decision by Moscow authorities to allow investors to convert part of their certificates of deposit into local shares.

The conversion was carried out without the “participation or supervision” of the German bank, and Deutsche Bank was unable to match the company’s shares with certificates of deposit.

Deutsche Bank is the first major bank to informally notify holders of depositary receipts that they may not be able to return all the shares they are entitled to, two sources familiar with the matter told Reuters.

Certificates of deposit are issued by a bank and represent shares of a foreign company traded on a local stock exchange. Exchange of depository receipts for shares of a Russian company is the first step in trying to get the money back.

What the Russian shares of Deutsche Bank have lost

The shares of the national airline “Aeroflot”, the construction company “LSR Group”, the metallurgical companies “Mechel” and “Novolypetsk Metallurgical Combine” were affected. Western sanctions and countermeasures adopted by Moscow have affected the assets of citizens and investors on both sides.

Moscow also requires foreign investors to contribute 10% to the state budget, an initiative that Washington classifies as an “exit tax”.

In addition, the Kremlin has temporarily seized assets owned by foreign companies, as it did in April with the Russian subsidiaries of some European energy companies, signaling a strategy to reduce foreign influence on companies seen as vital to its economic and energy interests. .

This month, the Kremlin also talked about nationalizing the assets of “naughty” foreign companies.

A source cited by Reuters said a significant number of investors, ranging from small hedge funds to large global asset managers, still hold depository receipts for shares in Russian companies.

Although most investors have revised the value of their Russian assets down to zero, there are still some who hope that the value of their investments will recover in the future.

Deutsche Bank made huge profits in Russia last year because it decided not to suspend operations in the country under Vladimir Putin after the Russian invasion, a move followed by other Western lenders.

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