Of the 13 trillion rubles. issued in Russian bonds paper 8 trillion (61,5%) are illiquid. This is reported by “Vedomosti” with reference to the national settlement Depository (NSD).
According to the publication, earlier this week, the first Deputy Chairman of the Bank of Russia Sergei Shvetsov said that these bonds will soon have to re-evaluate. The regulator wants to move away from the practice, when assessing illiquid bonds is based on quoted market prices, and expects to replace them with data on the liquidity of the price centers that are created to fair valuation of illiquid securities, said Shvetsov at the XII REPO forum.
“In international accounting standards the first criterion is not the presence or absence of market quotations, and the presence or absence of active market”, said Shvetsov.
The expert Board of the price center NSD (the Council consists of banks as well as representatives of the Central Bank) is currently working on a new valuation model illiquid bonds, told “Vedomosti” Chairman of the Board George Urumov. The market price will be calculated given the concentration of assets and number of investors, he explained. So, if the issue buys one or two participants, it will be considered illiquid. Urutov noted that the opinion on how to consider liquidity, supported by all Council members.
If the market is slack and the instrument is illiquid, the price center will use as the basis for determining fair value the probability of default. Development of methodology for the determination of default is the main task of the Council early next year, said Urumov.
Their methods of evaluation are also the group “Region” and assessment centre Cbonds, which, according to one of the appraisers filed documents for accreditation at the Central Bank. Both centers declined comment to the newspaper.