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Russia's Deposit Insurance Agency gets involved in Promsvyazbank's recovery

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Russia's Deposit Insurance Agency gets involved in Promsvyazbank's recovery

The Russian Deposit Insurance Agency will spend 113.4 billion Russian rubles to acquire additional shares issued by PAO Promsvyazbank, after which its holding in lender will amount to 99.9%, the Central Bank of the Russian Federation said March 21.

The DIA will also provide financial assistance to the bank, the regulator noted, adding that the planned financial measures will be financed from an asset contribution that the agency will receive from the central bank.

Toxic assets held by Promsvyazbank will be sold to complete its financial recovery, and the lender will repay liquidity funding received earlier from the central bank by the end of 2018.

The planned measures will help Promsvyazbank comply with individual capital adequacy requirements, as well as capital conservation and systemic buffer, the central bank noted.

The measures announced by the regulator are in line with legislation signed by President Vladimir Putin earlier in March. The legislation provides for acquisition of Promsvyazbank by the DIA and the subsequent transfer of the bank into the ownership government.

Bailed out by the central bank in December 2017, Promsvyazbank was picked by the Russian Finance Ministry to become the main lender to service Russian defense sector companies, a move aimed at shielding other financial institutions from potential U.S. sanctions.

As of March 21, US$1 was equivalent to 57.30 Russian rubles.