Russia to give $19 billion to "bad debts" bank
Russia’s Central Bank will provide Trust Bank with a combined 1.1 trillion rubles ($19.17 billion), Central Bank Deputy Governor Vasily Pozdyshev said.
The banks’ problematic assets could be united under Trust Bank, undergoing financial rehabilitation by the Bank of Russia through the banking sector consolidation fund,
The regulator will complete all structural decisions to create a problematic assets bank during the quarter. "At first, it will function with a bank license," the deputy chairman of the Central Bank said. "We propose to make a small change in the law so that the bank of bad debts could surrender its license, because the Central Bank will be its only creditor," Pozdyshev added.
The advisor on macroeconomics to the CEO of the 'Opening-Broker' brokerage house, economist Sergey Hestanov, speaking to a correspondent of Vestnik Kavkaza, explained that the creation of such a "bank of bad assets" is a common practice. "This is a typical way of working with bad assets, when they are united and a specialized structure is created for their sale or another type of their utilization. The concentration of all problem assets in one fund allows more flexibility in chosing options for their implementation, often they even merge with each other inside the fund. This is a fairly popular world practice," he said.
At the same time, the efficiency of the return of funds through such a fund is not guaranteed. "This will depend on two factors: first, the professionalism of those people who will manage this process, and second, the quality of the assets. The second factor raises big questions, since it is impossible to assess the quality of problematic assets in advance," Sergey Hestanov pointed out.
The professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, noted that transfer of all bad assets into a single structure, first of all, will improve the banks undergoing financial rehabilitation. "The thing is that one puts bad assets in one place, clearing the balance sheets of banks, which dramatically improves their situation. The bank of "bad assets" undergoes a long and slow work, because these assets are often bad simply because they require considerable labor costs - lawsuits, asset restructuring, waiting for a more favorable market situation," he expects.
As for the effectiveness of the refund of funds spent on rehabilitation, it is not at the forefront when creating such a bank of "bad" assets. "A full reimbursement of funds is not a matter of life and death for the Central Bank of Russia, because the rehabilitation was paid by state money. The central bank took 2.5 trillion rubles out of its pocket, and the losses of the banks were covered. If such procedures were conducted within the framework of a private business, then, probably, getting this money back would be really decisive issue," Alexander Abramov concluded.