The government of Russia has bolstered a new mechanism for rehabilitation of banks that the Bank of Russia proposed. The official opinion about the draft law on rehabilitation of lending institutions was posted on the website of the Cabinet.
The bill provides for the regulator being able to make capital injections into banks under rehabilitation. To this end, a fund for consolidation of the banking sector and a management company will be established to make decisions to inject funds into a troubled bank, and also on the subsequent sale of its shares.
The management company will be entitled to manage assets on trust terms, namely (a) shares (equity stakes in) of lending institutions that it will receive for management from the Bank of Russia, (b) mutual funds whose trustor, if found, may be only the Bank of Russia, (c) rights (of claim) against subordinated loans (deposits, loans, and bonded loans), (d) other loans, credits, deposits and bank guarantees.
"The application of this bill will make it possible to reduce funds that the state spends to rescue banks, and also to achieve rehabilitation of banks within a shorter period," the document points out.
CBR chairwoman Elvira Nabiullina earlier said in an interview to Rossiya 24 that the regulator expects the new rehabilitation mechanism, which aims to give up the credit-based rescue scheme in favor of equity participation, to get under way as early as the second half of 2017.
