Russia’s B&N Bank balance sheet hole could reach US$6 billion

MOSCOW: Russia’s B&N Bank could have a US$6 billion hole in its balance sheet, the country’s central bank said after coming to the aid of the private lender, its second private bank rescue in less than a month.

Although this would make the B&N Bank bailout slightly smaller than that of Russia’s biggest private lender, Otkritie Bank, the rescue has raised questions among investors about central bank supervision and the stability of a banking sector buffeted by an economic downturn and Western sanctions.

Otkritie’s shortfall is estimated at US$6.9 billion, but market insiders believe that a systemic crisis is unlikely, because the state banks that hold most of Russia’s banking assets are viewed as solid, with the problems confined to a handful of private banks.

Central bank deputy governor Vasily Pozdyshev told reporters that, based on a preliminary estimate, B&N Bank and its affiliated lenders would need 250 billion to 350 billion roubles (US$6.03 million) in new provisions to cover bad loans.

Some of this money was coming from the bank’s shareholders, a holding controlled by Russian oligarch Mikhail Gutseriyev and his family, thereby capping the central bank contribution.

The bank’s owners have already set aside additional provisions as requested earlier by the central bank, which cut the bank’s capital by one third and triggered the bailout, but those provisions were not enough, Pozdyshev said.

Depending on what the central bank administrators find out about the bank’s assets and liabilities, the regulator could decide to take 100 per cent ownership, Pozdyshev said.

The central bank has suspended the management role of Mikail Shishkhanov, Gutseriev’s nephew, who was this week appointed chairman of B&N Bank’s board, Pozdyshev said, but did not say who would take over.

Shishkhanov said on Thursday that the bank did not have any holes in its capital but only loans which require additional provisions, TASS news agency reported. — Reuters