UniCredit Bank provides its clients with services relating to repurchase transactions. A repurchase transaction is a transaction involving the sale of securities at a discount from the market price, with the obligation to repurchase them at a certain time in the future at a price that exceeds the initial one by the interest accrued for use of the funds. The initial discount is security against a dramatic fall in the market price of the securities that are the subject of the transaction.
Repurchase Transaction Pattern
UniCredit Bank concludes repurchase transactions in rubles and
U.S. dollars. A repurchase transaction in rubles may be entered
into with corporate stocks and debentures. Repurchase transactions
in U.S. dollars are carried out with 1999 issue OVGVZ and OVGZ as
well as with securities denominated in foreign currency and issued
by residents.
Repurchase transactions on the Russian market are carried out largely to refinance securities portfolios: the seller receives the amount of funding, whereas the buyer receives the title to securities for a certain term as a guarantee of repayment.
Repurchase transactions are an efficient tool designed to generate additional yield on securities portfolios. For this purpose, the investor sells securities under a repurchase transaction and reinvests the proceeds into short-term instruments with a yield exceeding the interest rate under the repurchase transaction.
A client wishing to make repurchase transactions through UniCredit Bank must open a custody account so that securities rights can be accounted for as well as checking accounts in the appropriate currencies for the transaction settlements.
Repurchase transactions ensure the client:
- the opportunity to manage short-term liquidity
- low interest rates as compared with a conventional loan
- the maintenance of a sureties portfolio
Repurchase transactions are made on the basis of a general agreement on “General Terms and Conditions for Making Transactions Involving the Sale and Purchase of Securities with the Obligation of Repurchase”. This agreement lays down the basic conditions and procedure for making transactions, the procedure for the fulfillment of obligations by the parties, and the liability of the parties for the concluded transactions.