VTB wants to resume issuing subordinated bonds in future after regulatory changes, but not in 2026
MOSCOW. Nov 27 (Interfax) - VTB wants to resume issuing subordinated bonds in future after changes in regulations, but this will not happen in 2026, the Russian state bank's first deputy CEO, Dmitry Pyanov said in an interview with Interfax ahead of the Russia Calling! forum.
"It's not possible to increase capital requirements every year and block the way to one of the sources for topping up capital. Current regulation provides for the possibility of registering in capital only term subordinated bonds from the National Welfare Fund (NWF) and market subordinated bonds with a term of up to seven years that begin to amortize with the fifth year and quickly turn into an expensive short-term liability. For everything else there is still a restriction of 15% on the maximum rate of subordinated bonds. The number of capital sources is limited, to profit and an additional [share] issue. In other words, they unscrewed one leg of the stool under us and say 'balance on three legs, manifest a miracle balancing act!'" Pyanov said.
The Central Bank of Russia (CBR) plans to improve requirements for the conditions of issuing subordinated instruments so that banks are better protected in the event of stress, as well as to reduce the likelihood of them misselling such instruments to investors. The regulator planned to discuss new approaches with the market in the second half of 2025.
The CBR plans to separate subordinated instruments into two types. The first will be converted into shares with an elevated trigger and will be available only to shareholders. The second type will tentatively have a lower write-off trigger and possibility of restoration. If the bank manages to comply with statutory capital adequacy ratios with buffers, such an instrument will be restored (until then there will be restrictions on dividend payments). It is planned that this type of subordinated instrument will be available to shareholders and qualified investors.
"Next year we will ask to accelerate the introduction of new regulation of subordinated instruments, because in 2027 we face an increase in capital adequacy buffers of 1.25 percentage points at once," Pyanov said.
Asked whether VTB wants to resume issuing subordinated bonds, he said the bank is "fighting for all possible capital sources to be on the table."
"Of course we also want to issue, particularly since the proposed regulation regarding coupon payments is more client-oriented for the holder of the subordinated instrument," Pyanov said, adding that he was not talking about entering the market in 2026.
VTB suspended coupon payments on a number of issues of perpetual subordinated bonds in 2023 to strengthen its capital position. In addition, the bank suspended coupon payments on an issue of perpetual subordinated Eurobonds on December 6, 2022. VTB resumed coupon payments on all subordinated bonds in 2024.
