The Central Bank Expands “S” Account Capabilities: New Options for Asset Swaps

The Bank of Russia has introduced a new regulation allowing foreign investors to use funds held in “S” type accounts to conduct asset swap transactions with Russian residents involving previously blocked assets. Effective as of July 31, 2025, these changes aim to enhance the toolkit available for settling mutual claims amid restrictive measures.

While this regulatory decision does not create entirely new mechanisms, it offers market participants greater flexibility in utilizing existing financial instruments. It enables the deployment of previously frozen funds within clearly defined legal parameters, facilitating the gradual unblocking of assets and improving the investment climate.

Key Provisions of the Central Bank’s Decision

The new framework outlines two primary scenarios for the use of funds from “S” type accounts:

• Conducting asset swap transactions. Non-resident investors are now authorized to transfer funds from their “S” accounts to Russian residents as part of agreements exchanging blocked assets. In such transactions, Russian investors acquire ownership rights over securities frozen under Russian jurisdiction, while foreign counterparties gain access to assets blocked abroad. Crucially, these transactions require prior approval from the Government Commission on Foreign Investment Control.
• Dividend payments to fulfill obligations. Foreign investors may also transfer dividends accrued on funds held in “S” accounts to residents to meet their financial obligations. Such transfers similarly require authorization from competent state authorities.

Context and Outlook for Investors

This Central Bank initiative aligns with broader efforts to adapt the financial system to current challenges and stimulate new investment inflows. Previously, the regulator approved rules for “In” type accounts, targeting foreigners operating in Russia with new, unfrozen capital. Additionally, restrictions on foreign currency purchases in the domestic market were lifted for foreign investors from unfriendly jurisdictions operating under these updated rules.

As Ministry of Finance representatives have highlighted, the strong returns offered by the Russian market remain a key factor attracting both friendly and unfriendly investors willing to engage through intermediary mechanisms.