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Russian regulator triggers subordinated debt write-off at Promsvyazbank

The Central Bank of the Russian Federation decided to recapitalize PAO Promsvyazbank via its banking sector consolidation fund, with the decision triggering the termination of the lender's subordinated liabilities, the regulator said Dec. 22 without providing information on the size of the planned recapitalization.

The central bank noted that Promsvyazbank's subordinated bond-secured loans will be written off, while subordinated deposits will be converted into equity. The bank, taken over by the banking sector consolidation fund earlier in December as part of a financial rescue procedure, will also terminate financial obligations to its executives and controlling entities.

The total value of Promsvyazbank's subordinated liabilities amounts to $1.2 billion and 36 billion Russian rubles, Vedomosti said Dec. 22, citing the bank's financial report for the nine months of 2017. Financial liabilities to the Russian Deposit Insurance Agency and Vnesheconombank amount to 30 billion rubles and 725 million rubles respectively, and the remaining sum falls onto subordinated bonds, according to the news report.

Meanwhile, Kommersant reported that the central bank intends to notify law enforcement agencies about the illegal activities of Promsvyazbank's managers, including the destruction/loss of corporate credit dossiers worth 109.1 billion rubles, the sale of the lender's shares shortly before the bailout and transfer of received funds to offshore company Promsvyaz-Capital, as well as financing the lender's subordinated debt via repo operations worth around 110 billion rubles without disclosing the transactions in financial statements. Russian media outlets also reported that one of the lender's co-owners, Dmitry Ananiev, left Russia.

As of Dec. 21, US$1 was equivalent to 58.55 Russian rubles.