BOFIT Viikkokatsaus / BOFIT Weekly 2018/27

The Central Bank of Russia last year had to take over three large private banks ­– Otkritie, B&N Bank and Promsvyazbank – to ensure their continued operations. The CBR announced last week that it was investing another 43 billion rubles to capitalise Otkritie Bank. The bank will immediately be forced to use most of the infusion to cover losses in its pension funds that result, among other things, from the drop in the value of shares in its Rosgosstrakh insurance company.

The CBR also made 3-5 year temporary deposits totalling 174 billion rubles in a number of banks undergoing restructuring. These deposits are set to be used for reorganizing and concentrating weak assets in troubled banks and companies owned by them onto balance sheets of select troubled banks. Finally, the select banks are planned to be merged under an asset management company established on the basis of Trust bank, into which all the weaker assets of the troubled banks will be marshalled. The current plan is to restore Otkritie Bank to health and sell it to private investors.

The CBR is now using a total of 217 billion rubles (3.5 billion USD) in extra funds to support banks it has taken over. CBR governor Elvira Nabiullina stated in early June that the central bank had thus far spent 760 billion rubles (12 billion USD) on recapitalising troubled banks. It had also provided troubled banks 1.86 trillion rubles (30 billion USD) as deposits. Thus, the CBR to date has used over 45 billion USD (about 3 % of 2017 GDP) in supporting the three banks that it took over last year. Some of this amount, however, should be recovered when assets in banks acquired by the CBR are sold off as well as in the planned privatisations of the banks.