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Russian Regional Development Bank's capital ratios fall after Peresvet takeover

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Russian Regional Development Bank's capital ratios fall after Peresvet takeover

JSC Russian Regional Development Bank group, which also includes financially troubled JSCB for Charity and Spiritual Development of Fatherland Peresvet, violated capital requirements in 2017, Vedomosti reported March 5, citing the group's IFRS annual report.

The group's common equity Tier 1 ratio and Tier 1 capital adequacy ratio dropped to 0%, compared with the required level of 4.5% and 6%, respectively. The group also violated requirements on risk exposure to one or a group of related borrowers, with the ratio amounting to 57.2%, compared with the maximum allowed level of 25%.

The capital ratios of the group were negatively affected by the June 2017 takeover of Bank Peresvet as part of its financial recovery procedure, Vedomosti noted. Russian Regional Development Bank expects that at least 138 billion Russian rubles worth of loans from Peresvet's 165 billion ruble portfolio will not be repaid, the group reportedly said in the annual report.

Russian Regional Development Bank believes, however, that the financial recovery of Peresvet will have "a significant positive effect" on the value of the group's capital and that it will soon be able to comply with regulatory requirements.

The Russian central bank launched a financial recovery procedure for Peresvet in 2017 and picked Russian Regional Development Bank to oversee the process, with almost 67 billion rubles of financing allocated to the financial recovery by the regulator and a further 70 billion rubles coming from Peresvet corporate creditors.

As of March 5, US$1 was equivalent to 56.69 Russian rubles.