18 Dec 2017 09:33

Promsvyazbank owners proposed to spread extra provisioning over at least three years

MOSCOW. Dec 18 (Interfax) - The owners of Promsvyazbank (PSB) , which will be bailed out through the Central Bank of Russia's (CBR) Banking Sector Consolidation Fund, proposed to the CBR to spread out the formation of additional provisions over at least three years, CBR deputy chairman Vasily Pozdyshev told reporters.

The owners proposed several plans to increase the bank's financial stability, but they were all based on two ideas. The first idea called for spreading out additional provisioning over a substantial period of at least three years. "And the second idea was that over this time the bank's capital would be supplemented and compensate this additional provisioning with the profit of the bank itself," Pozdyshev said.

"These plans were considered, but not accepted by us as possible for execution for two reasons. We don't have the legislative ability to grant such a long deferment on additional provisioning. The only possibility of a schedule for additional provisioning is in the event of financial recovery through the Deposit Insurance Agency under the old bailout mechanism. The Bank of Russia is not prepared to use the old bailout mechanism for such a large bank," Pozdyshev said.

"As for bolstering capital with bank profit, if we look at the bank's profit, the profit for eleven months was 16 billion rubles, and in these 16 billion rubles almost 10 billion rubles are the result of the release of provisions, in other words these are separate deals, revaluation of certain assets [...]. It's unrealistic, in our view, to imagine that with such a balance sheet, even with all possible improvements in business, that about 200 billion rubles of additional provisioning can be compensated with this amount of current profit over three years," Pozdyshev said.