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14 I Companies & Markets bne February 2018
Russia’s central bank to
nationalise Promsvyazbank
Ben Aris in Berlin
The Central Bank of Russia (CBR) announced it will nationalise yet another Garden Ring bank – Promsvyazbank (PSB) – on December 15.
Only a day earlier the CBR demanded that PSB, one of four leading commercial banks that were identified as being in trouble earlier this year, inject a massive RUB100bn ($1.69bn) of fresh capital – more than ten-times the amount the owners were planning to invest – but pulled the plug on the lender less than 24 hours later.
PSB is the country’s ninth largest lender and this is the third such collapse in under four months.
The regulator will use the new Banking Sector Consolidation Fund (BSCF) to take control of the lender that has RUB1.3 trillion in assets and has been expanding aggressively in recent years. The advantage of using the BSCF is that there is no need to close the PSB and trigger returning depositor’s money using the Deposit Insurance Agency (DIA).
In theory this is a cheaper way to close down commercial banks that are becoming too big to fail, simply due to the cost of the bailouts. PSB is also on the CBR’s list of strategically important banks and its collapse could cause system-wide problems. PSB will continue to function as normal and receive extra liquidity support for the meantime, the CBR said.
But there could be surprises. The closure of Financial Corporation Otkritie in September has already become Russia’s most expensive bank rescue ever, after the
CBR injected over RUB456bn into the failed lender to keep it afloat.
Brothers Dmitry and Alexei Ananyev, who have been struggling to put the institution back on an even keel, own PSB. The CBR’s capital injection demand was enormous, giving the lender's existing reserves of RUB152.7bn as of November 1. PSB is expected to collect RUB8bn in December
“The advantage of using the BSCF is that there is no need to close the PSB”
from spinning off non-core assets and was intending to add the same amount again by investing profits into its capital.
The Garden Ring banks have all come under increased pressure since the spring as the CBR tightened its supervision of the sector. Problems first surfaced in June when Russia’s new domestic ratings agency Analytical Credit Rating Agency (ACRA) downgraded Otkritie to BBB, which precludes it from holding state money like pension funds.
The fourth Garden Ring bank named as being in trouble is Credit Bank of Moscow, which so far seems to have coped with the shocks to the system. However, PSB and CBOM have many of the same shareholders and given the opaque and incestuous nature of the loan books, there could be more trouble ahead.
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Poland's PiS
puts centrist
face forward as Morawiecki shakes up cabinet
Wojciech Kosc in Warsaw
Poland’s ruling Law and Justice (PiS) party car- ried out a major reshuffle of the government on January 9, replacing most controversial ministers with more moderate appointees.
The reshuffle appears to be an attempt by PiS to move the government to a more centrist position
Bulgaria to apply to enter Eurozone waiting room in first half of 2018
Denitsa Koseva in Sofia
Bulgaria will most likely apply to enter the Euro- zone’s waiting room, the European Exchange Rate Mechanism (ERM2), in the first half of 2018, Finance Minister Vladislav Goranov said on January 11.
An application to enter the ERM2 during Bul- garia’s six-month presidency of the EU Council
The scope of the changes indicates Morawiecki has been allowed a lot of manoeuvring room by PiS’ chairman and de facto decision maker, Jaroslaw Kaczynski.
ahead of three successive elections in the coming years. Getting rid of some of the most unpopular and contentious ministers could bolster the ruling party ahead of an important local election due in the autumn. The local election will be followed
See page 2
was already expected. In December, the country got a positive signal from Brussels that it might be accepted in the ERM2 as Valdis Dombrovskis, European Commission’s Vice-President for the Euro and Social Dialogue, said that it would not be
See page 3
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