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Report: Rossiysky Capital plans debt write-off to restore capital ratios

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Report: Rossiysky Capital plans debt write-off to restore capital ratios

Bank Rossiysky Capital (JSC) plans to write off 26.2 billion Russian rubles worth of subordinated liabilities in June in order to bolster its capital ratios, Kommersant reported May 30.

As of May 1, the lender's core Tier 1 ratio N1.1 and Tier 1 ratio N1.2 were at the level of 2.4% against the respective minimum levels of 4.5% and 6%, while the total capital adequacy ratio N1.0 was at 4.9% against the minimum of 8% required for Russian banks, Kommersant noted. The newspaper added, however, that the lender is undergoing a financial recovery procedure, so it is not obliged to fulfill regulatory capital requirements. Rossiysky Capital said the capital-ratio drop was expected and is fully reflected in its financial statements for 2017.

The planned write-off will affect the lender's liabilities to the Russian Deposit Insurance Agency, which controlled the bank until December 2017, a market source told Kommersant. The total value of subordinated liabilities owed by the financial institution to the DIA stood at around 40 billion rubles at the end of 2017, the newspaper said.

In April, Rossiysky Capital asked its new owner, JSC DOM.RF Russia Housing & Urban Development Corp., for a financial contribution of 22.9 billion rubles, but a decision on the potential financial support for the bank has not yet been taken, according to the newspaper.

Analysts cited by Kommersant believe that the planned 26.2 billion ruble write-off combined with the 22.9 billion ruble financial contribution from the new owner should help the bank restore its capital adequacy ratios and improve financial stability.

As of May 30, US$1 was equivalent to 62.28 Russian rubles.