Russian regulator reportedly moving to bail in 'church bank' Peresvet

Russian regulator reportedly moving to bail in 'church bank' Peresvet
Are higher powers protecting the licence of Peresvet?
By bne IntelliNews February 20, 2017

The Central Bank of Russia (CBR) as of February 20 passed governance of Peresvet bank, controlled by the Russian Orthodox Church, to the control of the Deposit Insurance Agency (DIA), Vedomosti daily reported, citing the regulator's order.

It is still not clear, however, what bail-out mechanism will be applied to the troubled bank, which reportedly holds major deposits of state corporations and VIP clients.

Notably, and despite Peresvet's evident troubles and downgrades to default-level ratings, the bank's licence has not yet been pulled as in the case of others like Vneshprombank.

Some of the large creditors of the bank such as Inter RAO energy holding, RusHydro hydropower holding, and the Chamber of Industry and Trade (which holds 24.4% in the lender) in December 2016 urged the CBR to bail the bank out, Vedomosti noted.

In early February, Peresvet approved an issue of 15-year bonds worth RUB125bn yielding 0.51% that were to be sold to the bank's largest creditors with around RUB500bn (€8bn) deposited, unnamed sources close to the CBR told the paper.

Therefore about 30 creditors could convert the bonds into equity in a bail-in mechanism. Until March 17, the DIA will collect bids for the bail-in mechanism, according to one creditor participating in the scheme, with some technical issues making the deal still uncertain.

Previously industry sources assumed that a hole in Peresvet's capital worth tens of billions of rubles could be a serious burden on the strained DIA, which is likely to keep the CBR from bailing the bank out directly.

The Moscow Patriarchy controls 36.5% of the bank, another 13.2% is held by the Church-controlled fund Sodeystvie, 24.4% by the Russian Chamber of Trade and Commerce, with smaller stakes controlled by private individuals, including 12.4% by the bank's head Alexander Shvetsov.

On October 21, the CBR took over Peresvet's operations by appointing a temporary administration and halting any transfers to creditors.

Fitch Ratings downgraded the bank's long-term Issuer Default Rating (IDR) from 'B+' to default-level 'D', the agency said on October 24, while Standard & Poor's also downgraded the bank's long-term credit rating from 'CCC-' to 'D'.