{"id":25037,"date":"2017-08-30T17:47:11","date_gmt":"2017-08-30T22:47:11","guid":{"rendered":"http:\/\/olduvai.ca\/?p=25037"},"modified":"2017-08-30T17:47:38","modified_gmt":"2017-08-30T22:47:38","slug":"fearing-contagion-russia-bails-out-bondholders-in-its-biggest-bank-collapse-yet","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=25037","title":{"rendered":"Fearing Contagion, Russia Bails Out Bondholders in its Biggest Bank Collapse Yet"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2017\/08\/30\/fearing-contagion-russia-bails-out-bondholders-in-its-biggest-bank-collapse-yet\/\">Fearing Contagion, Russia Bails Out Bondholders in its Biggest Bank Collapse Yet<\/a><span style=\"color: #333333; font-size: 16px;\">\u00a0<\/span><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>\u201cThe panicky mood has been dampened down,\u201d as o<\/strong><strong>ther banks are rumored to be teetering.<\/strong><\/p>\n<p>True to the playbook of bank bailouts, the Central Bank of Russia (CBR) decided to bail out Bank Otkritie Financial Corporation, the largest privately owned bank in the country, and the seventh largest bank behind six state-owned banks.<\/p>\n<p>The Central Bank put in an undisclosed amount of money in return for at least a 75% stake. This is likely to be Russia\u2019s biggest bank bailout ever, well ahead of the current record holder, the $6.7 billion bailout of the Bank of Moscow in 2011.<\/p>\n<p>Otkritie and its businesses would operate as usual, the Central Bank said. The banks obligations to creditors and bondholders, which include other Russian banks, would be honored to avoid contagion.<\/p>\n<p>The controlling shareholder of Otkritie bank is Otkritie Holding, with a 65% stake. The bank had grown by wild acquisitions, grabbing other banks, insurers, non-pension funds, and the diamond business of Russia\u2019s second largest oil producer Lukoil. Otkritie Holding is owned by executives of Lukoil, state-owned VTB bank, Otkritie, and other companies. So clearly, this bank is too big to fail.<\/p>\n<p>Lukoil is also one of Otkritie\u2019s largest clients. So Lukoil CEO Vagit Alekperov said in a <a href=\"https:\/\/www.reuters.com\/article\/russia-banks-otkritie-lukoil-idUSR4N1HF033\" target=\"_blank\" rel=\"noopener\">statement<\/a> that he saw no risks for Lukoil associated with the bail out, and that Lukoil supported the Central Bank\u2019s decision.<\/p>\n<p>In July, according to <a href=\"https:\/\/www.cnbc.com\/2017\/08\/30\/russia-in-one-of-biggest-bail-outs-in-its-history-rescues-otkritie-bank.html\" target=\"_blank\" rel=\"noopener\">Reuters<\/a>, Kremlin-backed rating agency ACRA downgraded Otkritie to a BBB- rating, citing the \u201clow quality of its loan portfolio.\u201d<\/p>\n<p>On August 17, <a href=\"https:\/\/www.moodys.com\/research\/Moodys-places-ratings-of-Bank-Otkritie-Financial-Corporation-PJSC-on--PR_371344\" target=\"_blank\" rel=\"noopener\">Moody\u2019s<\/a> placed Otkritie on review for possible downgrade, citing two big issues:<\/p>\n<ol>\n<li>\u201cThe recent elevated volatility of the bank\u2019s customer deposits, which puts pressure on its liquidity position and negatively affects its funding costs\u201d<\/li>\n<li>The bank\u2019s \u201cincreased involvement in financing the large financial and industrial assets of its controlling shareholder Otkritie Holding.\u201d<\/li>\n<\/ol>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Fearing Contagion, Russia Bails Out Bondholders in its Biggest Bank Collapse Yet\u00a0 \u201cThe panicky mood has been dampened down,\u201d as other banks are rumored to be teetering. True to the playbook of bank bailouts, the Central Bank of Russia (CBR) decided to bail out Bank Otkritie Financial Corporation, the largest privately owned bank in the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[2015,122,1992,15756,694,4254,4255],"class_list":["post-25037","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bailout","tag-central-bank","tag-contagion","tag-otkritie-bank","tag-russia","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25037","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=25037"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25037\/revisions"}],"predecessor-version":[{"id":25039,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25037\/revisions\/25039"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25037"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25037"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25037"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}