Sberbank is seeking an out of court settlement with Russian monopoly pipeline operator Transneft, following a court decision to award the state-owned enterprise (SOE) a $1bn award on a derivative contract, Interfax reports.
The scandal has got both Sberbank and the Central Bank of Russia (CBR) very worried as if Transneft’s award stands then it could open the floodgate for other claims that would be worth hundreds of billions of dollars and cause the financial sector to collapse.
The CBR requested the systemically important banks to provide information on risk hedging for largest clients on a short notice, Kommersant daily reported on August 22 citing unnamed market participants.
Reportedly the regulator is alarmed by the controversial case of oil pipeline monopoly Transneft being awarded RUB67bn (€1bn)compensation on loss incurred from currency hedging operations with Russia's largest lender Sberbank a result of ruble devaluation in 2015.
In the meantime Sberbank is trying to find a compromise with Transneft. Sberbank has proposed that Transneft drops its claim in their legal dispute over a derivatives deal in exchange for preferential terms for the bank's products and services, a draft out-of-court settlement put together by the bank said, reports Interfax.
Transneft lost RUB67bn ($1.1bn) rubles in a derivatives deal with Sberbank earlier this year in a bad currency bet, but managed to have its obligation to pay annulled by the courts. The court ruled that the RUB67bn was an "excess profit" for Sberbank, which ought to be compensated, as the company had no means to evaluate the possible outcomes of the deal.
Sberbank and the central bank have said that court decisions that can annul derivative contracts set a dangerous president that undermines the stability of the financial sector.
It seems that Sberbank is now trying to dodge this bullet and has proposed that the deal be considered valid in the out-of-court settlement, but will provide loans "at the most attractive terms for the company", "the highest possible rate for deposits" and other preferences to Transneft in exchange for dropping the lawsuit, Interfax reports.
Analysts have also been downbeat on the scandal. "We regard the news as negative as it suggests that Sberbank is not completely confident that it would win a lawsuit against Transneft with respect to the derivative contracts," Aton brokerage said in a research note.
The Moscow appeals court is scheduled to hear the case on August 23.