Sovcombank to move blocked assets to separate legal entity

MOSCOW. July 19 (Interfax) - The shareholders of Sovcombank voted at an extraordinary general meeting to approve the Russian lender's restructuring in the form of a spin-off of a separate legal entity to which frozen assets will be transferred.

A portion of the distressed foreign currency assets blocked in "unfriendly" countries will be transferred to Sodeistviye Mezhdunarodnym Raschyotam LLC (International Settlements Assistance), the bank said in a statement.

The restructuring process will take several months and will conclude around the end of the third quarter of 2023, Sovcombank said.

"The spin-off of the legal entity in line with the new law 292-FZ will make it possible to transfer obligations to unfriendly nonresidents and a comparable amount of blocked assets to this newly formed legal entity. This will enable the bank to simplify work with blocked assets and debts to unfriendly creditors, as well as make it possible to reduce the effect from provisioning for blocked assets, and will have a negligible impact on capital, liquidity and statutory ratios," Sovcombank first deputy CEO Sergei Khotimsky was quoted as saying in the press release.

Khotimsky told Interfax on the sidelines of the St. Petersburg International Economic Forum in June that Sovcombank was considering transferring blocked assets to a separate legal entity.

Law 292-FZ, which went into effect in the summer of 2022, allows banks subject to sanctions to restructure by establishing a new legal entity and transferring to it assets frozen due to sanctions, along with liabilities in the form of obligations to foreign creditors. Thereafter, all payments on debts to non-resident clients are made only with the assets of the new company.