Russian Central Bank plans to divide banks' subordinated instruments into those for large shareholders, wide range of investors

SOCHI. Sept 26 (Interfax) - The Central Bank of Russia plans to improve the rules for issuing subordinated instruments of banks, establish a high conversion trigger for them, and divide them into two types, Central Bank Governor Elvira Nabiullina said at the 21st International Banking Forum organized by the Association of Banks of Russia.

"The first type that large shareholders of a bank could purchase, let's say, is with a stake over 5%. If this sufficiently high trigger is broken, then the debt must be written off to capital, and this will be [...] a tool for the financial recovery of the bank," Nabiullina said.

"The second type of subordinated debt could be available to a wide range of investors, though writing it off would only be possible at the amount needed to recover capital. Once capital has been recovered, profit would appear, and this subordinated debt must be recovered," Nabiullina said, adding that a bank would not be permitted to pay out dividends and bonuses until the debt has been recovered.