Russian government makes public OFZ-based capital upsizing regulations for banks

The Russian government has published regulations for the submission by banks of proposals about the participation in the procedure for increasing capitalization and taking a decision to satisfy (refuse to satisfy) a bank’s proposal seeking participation in the procedure for boosting capitalization through the swap of preferred shares for federal loan bonds. As RIA Novosti wired, the document was posted on the government’s web site.

The finance ministry has put aside in 2009 for these purposes Rub 150 bln which will most likely not be called for, first deputy CBR chairman Alexei Ulyukaev said adding the 2010 figure is Rub 100 bln. Last week Russian Prime Minister Vladimir Putin said the initially planned amount of Rub 250 bln was slashed by 2.5 times, and Rub 150 bln was redistributed to the Anti-Crisis Fund. As estimated by CBR and the government, around 75 banks have a chance to get cash to bump up their capitals.

In line with the order, for capital upsizing through federal loan bonds a bank should hold a long-term creditworthiness rating assigned as of July 1, 2009 by at least one of the leading rating agencies, specifically, В- from Fitch and S&P or B3 from Moody’s (investment ratings).

A bank’s assets as of July 1, 2009 should be not less than Rub 30 bln and own capital adequacy be equal to 10% the lowest. Furthermore, no bans should be imposed by CBR on a lending institution for the conduct of specific banking operations or measures being taken to prevent bankruptcy.

CBR should take no measures against a bank willing to obtain state aid as to cap the interest rate which the bank defines in bank account agreements. Unjustifiably high deposit rates have been a serious matter of concern for the regulator in recent months, first deputy CBR chairman Gennady Melikyan said. A bank that decided to participate in the procedure for bumping up capital via federal loan bonds is to forward required documents to the finance ministry and the central bank. The list of the required documents is composed of a business plan containing a proposal about the amount of state support for the bank (total number of federal loan bonds) and also the forecast for the bank’s primary operating numbers until the end of 2011 in connection with the proposed capital upsizing. Also, a bank needs to provide “documents certifying a decision adopted by the bank’s relevant governing body to cancel award fees and bonus payments to the bank’s top executives in the event no dividends are paid to the Russian Federation on registered preferred shares placed as part of the capital upsizing procedure”.