''We expect to receive the assets we did not yet receive''

The Bank of Russia eyes assets of troubled bank’s owners

In 2017, the Russian central bank spent over $40 billion to bail out three big private banks (Otkritie, B&N and Promsvyazbank). So far, the regulator has received only about $1,6 billion from the banks' former owners, who ''should be responsible with all their assets'', according to Governor Elvira Nabiullina.

The Bank of Russia would like to take control of the assets of the owners of banks it has had or will have to rescue, says Reuters citing the bank's Governor Elvira Nabiullina. ''If the controlling shareholder has brought the bank to the situation where its license is to be withdrawn or the state is forced to spend funds on a bailout, then the (former) owner should be responsible with all their assets,'' said Nabiullina adding that it would concern also the owners of the banks already taken over in bailouts. ''In that regard, we expect to receive the assets we did not yet receive, including financial ones."

Last year, the regulator had to rescue three big private banks. According to Nabiullina, the Central Bank has spent 758,3 billion rubles ($12,2 billion) to boost the capital of Otkritie, B&N and Promsvyazbank and to provide another 1,86 trillion rubles ($30 billion) in deposits. So far, only around 100 billion rubles ($1,6 billion) have been recovered in assets from the banks' former owners. Now the regulator is considering providing additional liquidity for a non-core asset bank that will take over the non-core and bad assets of the rescued banks.

Governor of Russian Central Bank Elvira Nabiullina. Photo: kremlin.ru

In order to decrease the impact from western sanctions on the Russian economy, the Central Bank has started wean banks off lending in foreign currencies, especially after a free-floating ruble regime was adopted at the end of 2014. As a result, the share of forex loans out of all loans had fallen from 31% to 21% over the past two years. The regulator is going to continue tightening requirements on forex lending. ''We are currently preparing proposals… on increasing provisioning requirements for forex loans on all types of borrowers, including exporters. There was no such requirement in the past,'' said the governor.

The Central Bank considers excessive merger and acquisition activity by banks and their former owners to be one of the triggers for the bailouts. Thus, earlier this year the regulator proposed increasing provisions for loans extended for such deals. Sberbank's CEO German Gref strongly opposed the proposal, as he considers that M&A deals for banks are a way to sell off bad debts. Nonetheless, Nabiullina confirmed that the Central Bank didn't welcome banks' activity in this field instead of lending for investment projects that could boost economic growth. ''We are currently discussing how rational it is to introduce increased provisioning requirements for outstanding (M&A) loans. There is no decision yet,'' she said.

The Russian banking sector is expected to post a profit of around 1,5 trillion rubles in 2018, stated Nabiullina.

By Anna Litvina