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Document Type

Case Study

Case Series

Resolution and Restructuring

Abstract

In July and August 2017, Otkritie Bank, Russia’s largest privately owned bank, experienced a deposit run related to concerns over Otkritie’s recent acquisitions. The run prompted Otkritie’s shareholders to approach the Central Bank of Russia (CBR) for assistance. On August 29, 2017, the CBR announced a rescue plan for Otkritie. In it, the CBR pledged to become Otkritie’s main investor using a newly created resolution mechanism wherein the CBR would take at least a 75% equity stake using funds from the Fund for Banking Sector Consolidation, a subdivision of the CBR. The CBR simultaneously appointed a provisional administration, composed of CBR employees, to perform an audit, and in the process discovered a capital hole amounting to 188.9 billion Russian rubles (RUB; USD 3.3 billion) as of October 1, 2017. As a result, the CBR moved to bail-in about RUB 160 billion in subordinated debt and writing equity down to RUB 1, after the Duma passed amendments to the bankruptcy law authorizing the CBR-appointed provisional administration to do so. The CBR then purchased RUB 456.2 billion (99.9% equity) in newly issued ordinary shares to cover Otkritie’s capital deficit and extend financial assistance to Otkritie’s related entities. In March 2018, the CBR restructured Otkritie via a merger with a smaller bailed-out bank, B&N. At the same time, the CBR created a bad bank to take over a portion of Otkritie’s noncore assets. In June 2018, the CBR injected an additional RUB 42.7 billion in new capital in Otkritie, mostly to provide relief to related entities. In December 2022, the CBR sold Otkritie to state-owned (and former shareholder) VTB Bank for RUB 340 billion, as compared to the RUB 499 billion of capital support.

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