Central Bank of Russia tightens rules for banks allocating frozen assets, liabilities, VTB submits new application

MOSCOW. Dec 26 (Interfax) - The Central Bank of Russia has tightened the rules for banks to allocate blocked assets and liabilities, and VTB has submitted a new application, reducing the profit estimate from its reorganization.

Federal law no. 292-FZ allows banks to create a special legal entity by the end of 2026 and transfer frozen assets and liabilities affected by sanctions to its balance sheet. In October, VTB shareholders approved a reorganization involving the creation of a legal entity and the transfer of blocked assets and liabilities owed to unfriendly foreign entities to it. The list of allocated assets and liabilities must be approved by the CBR.

VTB initially estimated the amount of frozen assets to be transferred at 183 billion rubles. It expected a profit of 92 billion rubles from the reorganization, which was seen as a significant boost toward achieving its full-year profit target of 550 billion rubles.

The group earned 452.2 billion rubles in net profit to International Financial Reporting Standards (IFRS) in 11M. "We understand that we need to earn an additional 100 billion rubles [in December] to meet our 550 billion rubles target. We still have some 'ammunition' - [law] 292-FZ, which has not yet been finalized. The bank is undergoing a reorganization to create a special entity for frozen assets and liabilities owed to unfriendly holders. You've likely seen the Central Bank's press release establishing a new procedure for reviewing applications. Under this new procedure, we are submitting a new application today that fully complies with the CBR's decision, and we hope to close this chapter in December. I'll tell you how it ends in the new year," VTB First Deputy Chairman Dmitry Pyanov told reporters.

VTB's profit from the reorganization will be lower than initially forecasted, he said.

"The Central Bank's new document tightens the criteria compared to the previous version. Not only VTB but several other financial institutions submitted applications for allocation - some in the summer, others in early fall. Despite the 30-day review period, to my knowledge, none of the banks have received a positive decision yet. This is not due to bureaucracy, but rather a strategic reassessment of the topic of creating special entities by our regulator," he said.

The updated rules prohibit banks from including overdue liabilities to foreign entities in their applications. "Many had payment dates from 2022, including for term subordinated loans, as we did. Previously, we assumed we could submit an application to allocate these since they effectively remained unpaid to unfriendly holders. Now, there is an explicit prohibition," Pyanov said.