MOSCOW, Sept 1 (Reuters) - Troubled Russian banking conglomerate Otkritie Group may need up to 400 billion roubles ($6.90 billion) to plug holes in its balance sheet, a deputy governor at Russia’s central bank told Reuters on Friday.
The central bank said on Tuesday it would step in to rescue Otkritie Bank, one of Russia’s biggest private lenders, after it suffered a sustained run on its deposits amid worries about its loan portfolio.
Central Bank Deputy Chairman Vasily Pozdyshev told Reuters in an interview the regulator may need to inject between 250 billion and 400 billion roubles into Otkritie group’s capital as a part of a bail out.
Following are excerpts from his interview:
“The bailout will include not only Otkritie Bank, but also Trust Bank and Rosgosstrakh Bank, Rosgosstrakh insurance company, pension funds. There are around 30 legal entities in the financial group.”
“Now (the central bank‘s) temporary administration is assessing the risks and possible losses of the group. According to a preliminary assessment, taking into account that not all the group’s assets have been studied by the administration, the volume of extra capital the group would need is between 250 billion roubles and 400 billion roubles.”
“A substantial amount of funding should be provided to support Rosgosstrakh, a systematically important insurance company, and on finalising a bailout of Trust Bank. The rest will be spent on covering risks related to the operations of Otkritie Bank itself, including operations related to its holding company.”
“We don’t rule out a possible conversion of subordinated requirements. Those subordinated loans, the conditions of which do not envisage a conversion, will be written down according to the law.”
ON OTKRITIE‘S BBB- RATING, ASSIGNED BY ACRA IN JULY
“I wouldn’t say that the rating assignment became the main reason for a liquidity outflow (from the bank).”
“According to financial reports, 693 billion roubles of clients’ money left the bank in three months: in June, July and August. Out of this, only 221 billion roubles was related to the rating.”
“The rating publication is yet another event in a chain of circumstances that boosted the outflow ... We don’t see a need to change the regulation of rating agencies.”
“The funding that we are providing to Otkritie, and will be ready to provide to other banks if needed in the future, will be compensated by standard liquidity absorbing operations of the Bank of Russia. These are deposit auctions, issuing of OBR bonds.”
“The financial rehabilitation of Otkritie and the means which the Bank of Russia will use to achieve this, will have no impact on reaching targeted inflation and inflation itself.”
“First of all, the scale of the financial rehabilitation is not comparable to the financial market. The banking system has more than 80 trillion roubles in assets ... Secondly, financial-support funds will be provided gradually, not all at once. Thirdly, the central bank will absorb liquidity from the financial market.”
ON OTKRITIE‘S FUTURE
“After the financial rehabilitation of Otkritie, which could take from six to eight months, the Bank of Russia will be ready to sell this bank or the group.”
“I assume that investors will be found - if not in a year, then in two or three.”
“An option to list a part of the bank’s shares after its additional capitalisation and rehabilitation is also possible.”
“We have time to find a deserving candidate (to head the bank).” ($1 = 57.9410 roubles) (Reporting by Elena Fabrichnaya and Oksana Kobzeva; Writing by Andrey Ostroukh; Editing by Jack Stubbs and Pritha Sarkar)