Between 4 and 30 out of 81 core banks may be bailed out.
Kommersant has learned the details of a meeting on the restructuring of the banking system held by Prime Minister Vladimir Putin on February 3. Those at the meeting were presented with a list of 81 core banks and two options of government support: the bailout of 4-5 or 30 banks, respectively. However, because of the shortage of resources the White House may consider a third option: to rescue only as many banks as it can.
Minister of Economic Development Elvira Nabiullina will today deliver a report at a Government meeting "On Progress in Implementing Measures Aimed at Improving the Situation in the Financial Sector and in Certain Sectors of the Economy". The White House is reluctant to comment on the forthcoming report. The officials Kommersant has spoken to explained that the report would focus on the results of the anti-crisis measures already implemented by the Government and that the Ministry of Economic Development will not launch any new initiatives. According to information from Kommersant the meeting will discuss how to link the "industrial" government measures with measures to restructure the banking system. The latter were discussed at a meeting conducted by Prime Minister Vladimir Putin on February 3. Kommersant has learned the details of the discussion.
Participants of the meeting told Kommersant that on February 3 the First Deputy Prime Minister, Igor Shuvalov, reported on the various approaches to rescuing the banking sector. Most importantly, Mr Shuvalov presented the list of core banks prepared by the Sustained Economic Development Commission which he heads. The list includes 81 lending organisations. According to Kommersant data, it includes Yevrofinans, Mosnarbank, AKB National Clearing Centre, Moskreditbank, Raiffeisen Bank, Uralsib, Nomos-Bank, Promsvyazbank, MDM Bank, Petrokommerz, VTB, Rosselkhozbank, Rosbank, the Khanty-Mansiisky Bank and KIT Finance. The last bank on the version of the list obtained by Kommersant is Chelindbank.
The list was drawn up in accordance with the same principles as the list of core enterprises approved by Prime Minister Vladimir Putin on December 25, 2008. As in the case of core enterprises, being on the list does not guarantee automatic government support for the bank in question. "It merely identifies the banks which the government is watching closely," a participant in the meeting at the Prime Minister's office explained to Kommersant. According to Kommersant's information, no decisions were taken on February 3, not even on VTB which has requested 200 billion roubles.
It has yet to be decided whether assistance will take the shape of buying additional issues (tier 1 capital), or loans (tier 2 capital). The participants in Igor Shuvalov's meeting with the business community at the Troika Dialog investment forum, from which the press was banned, said that the Deputy Prime Minister had promised banks an additional 15% of capital in the shape of subordinated credits (tier 2 capital) on condition that the current shareholders also invest 15% of the capital. A RIA Novosti source says that Mr Shuvalov set the number of potential participants in the programme at 50 (out of 1,200 banks). His staff confirmed yesterday only the fact that the limit of subordinated credits would be 15% while dismissing all the other reports about his secret speech as fragmentary, misinterpreted and plucked out of context.
Kommersant understands that the February 3 meeting discussed three variants of restructuring the banking system. The most radical one envisaged the state bailing out 4-5 major banks and cleansing the system of financial and lending organisations that are not viable. It was mentioned that, before the 2008 financial crisis, Sberbank was the only Russian big bank by Western standards. Another option discussed at the meeting envisaged the rehabilitation of 30 lending institutions in which the government has a stake. The following are the eligibility criteria for such banks: the assets should amount to at least 35 billion roubles, balances in individual accounts should exceed 10 billion roubles and the number of private investors should be no less than 2,000. Such lending institutions would be eligible for greater capital support without bankruptcy procedure. All the other banks may be bankrupted without the government's participation.
Yet even the rehabilitation of 30 banks, the conference was told, would cost dearly, even if only 7% of the overall portfolio of the 30 banks are bad debts, the state would have to disburse 560 billion roubles of which Sberbank would account for 270 billion. If the number of bad credits goes up to 20%, the cost of the bailout would be a little over 2 trillion roubles of which Sberbank would need 930 billion roubles. Following the VEB's refusal to refinance the foreign debts of companies, the debts stand at $39 billion or 1.4 trillion roubles. According to Kommersant's information, the same variant envisages refinancing of the VEB's foreign debts "by a consortium with commercial banks". Furthermore, the plan would create an institution of "internal currency assets" and lift the restrictions on the purchase of foreign assets for the 30 banks. Yesterday the head of the VEB, Vladimir Dmitriyev, announced that the Bank would issue currency bonds worth at least 5 billion to refinance VEB projects.
In addition, the second option envisaged the creation of a "toxic asset" bank in the shape of a special government agency for the restructuring of the banking system. However, the First Deputy Prime Minister rejected the idea yesterday, saying that "unlike the plans of some Western countries to separate bad assets from good, Russia is not going to apply that practice because it creates massive corruption risks." The chances are, therefore, that the Government today will discuss not the first and not the second option, but the third option of restructuring the banking system that was discussed on February 3. It amounts to implementing the second scenario in manual control mode, that is, a case-by-case solution of all the issues concerning banks, considering the acute deficit of resources. Therefore, out of the 81 banks, not 30 banks will be rescued, but only those banks the government has money for.
Pyotr Netreba
