The Russian finance ministry is working on legislative amendments under which defense-sector loans will have to be transferred to PAO Promsvyazbank from other lenders together with part of their capital, Kommersant reported Feb. 20.

The ministry reportedly expects to submit the bill to the Russian Duma by the end of February. Deputy Finance Minister Alexei Moiseev said the transfer of defense-sector loans to Promsvyazbank will be voluntary, but lenders that decide to do so will have to transfer them together with capital, according to the newspaper.

The scheme is aimed at ensuring that Promsvyazbank meets required capital ratios after the loans are transferred, Kommersant noted, estimating that the lender could receive up to 80 billion Russian rubles of additional capital under the scheme.

The Russian government decided in January that Promsvyazbank, bailed out by the central bank in December 2017, would become a lender specializing in servicing local arms manufacturers to protect other banks from potential U.S. sanctions.

Finance Minister Anton Siluanov recently estimated that up to 1 trillion rubles worth of defense-sector loans could be transferred to Promsvyazbank from other lenders, including PAO Sberbank of Russia, JSC VTB Bank, AO Gazprombank, JSC Russian Agricultural Bank, as well as Bank Rossiya and PJSC Bank Saint-Petersburg. JSCB Novikombank, controlled by Russian state corporation Rostec, recently said it had no plans to transfer its loans to Promsvyazbank, the news report noted.

State-controlled Sberbank and VTB Bank expressed support for off-loading the loans issued to Russian defense-sector companies to a specialized lender, but they are against the accompanying transfer of capital, according to Kommersant.

Meanwhile, RBK Daily reported the same day that the State Duma's financial markets committee prepared amendments outlining a scheme for the transfer of Promsvyazbank to government ownership, a move planned as part of making it a defense-sector-focused lender.

Under the proposed amendments, the Russian Deposit Insurance Agency will acquire the shares of Promsvyazbank for up to 150 billion rubles, paying for them with OFZ government bonds received from the federal budget as part of the 2015 Russian banking-sector recapitalization program. After that, the Deposit Insurance Agency will transfer the bank to the Federal Agency for State Property Management, the news report said.

As of Feb. 19, US$1 was equivalent to 56.55 Russian rubles.