Russia Robbed Deutsche Bank Clients

• 26.06.2023, 15:25

Shares and investments are gone.

Deutsche Bank told clients it could no longer guarantee full access to their Russian shares, recalling the challenges investors face trying to recover funds stuck in a Russian company.

Germany's largest bank sent out a letter on June 9 saying it had found a shortage of shares backing depositary receipts issued by DB before the invasion of Ukraine, Reuters reported. The shares are in Russia in another depositary bank.

In a letter, Deutsche Bank explained the lack of shares by the decision of the Russian authorities to allow investors to convert part of depositary receipts into Russian shares. The conversion took place without the German bank's “participation or supervision” and Deutsche Bank was unable to reconcile the shares with the depositary receipts.

“This is the first major bank to formally notify holders of depositary receipts that they may not receive ownership of all the shares they are entitled to, said two sources advising investors who continue to hold Russian depository receipts,” the agency said.

Depository receipts are secondary securities certifying the ownership of shares. Their exchange for shares of Russian companies is the first step in an attempt by investors to return their money.

Shares of Aeroflot, LSR Group, Mechel and Novolipetsk Metallurgical Plant reportedly “disappeared”.

Deutsche Bank is now allowing investors to exchange depositary receipts for shares as part of its exit plans in Russia, a source told Reuters.

In its letter, Deutsche Bank said it would try to return more shares to their rightful owners, but that the net proceeds from the sale of the shares “are likely to be substantially below the market price”. According to the bank, the government commission of the Russian Federation requires that such shares be sold “at a discount of at least 50% of their estimated market value”.