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Sanitation of Bank "Opening" stirs fears in connection with a possible systemic banking crisis
Material posted: Publication date: 03-09-2017
The Central Bank of Russia began procedure of rescue of the Bank — one of the most ambitious in the history of the country. Thus it is fear-mongering about a possible systemic crisis in the Russian banking sector.

According to the Agency "Interfax", the Central Bank of Russia (CBR) announced on Tuesday evening that it plans to conduct the reorganization of the Bank "Opening", which occupies seventh place in the country by total assets, amid fears about its loan portfolio.

"I believe that the problems of the Bank "Discovery" raised concerns of a more General nature regarding the fact that the Russian banking sector is a serious and possibly systemic crisis", — wrote in e-mailed research note strategist London company BlueBay Asset Management Tim ash (Tim Ash).

Why now?

According to ash, the Russian authorities some time to realize that the banking system of the country, there are deep structural problems, but the Central Bank has pushed for action in 2014. Then a sharp drop in oil prices has been exacerbated by tough international sanctions in response to the annexation of Crimea and obvious Russia's role in destabilizing Eastern Ukraine. Ash believes that because of this, the Russian market was in an "extremely difficult position" and was "vulnerable" among its creditors.

Now, when the regulator is looking for ways to solve the problems associated with the isolation of the banking sector, ash called "preventive", but "painful" attempts of the Central Bank to improve the banking system "a big plus".

"In my opinion, it is remarkable that on the background of the action of the Central Bank on financial improvement of the Russian banking sector, which was closed a large number of banks, a special strength in the banking sector as a whole is not observed" — he said in conclusion.

Questionable practice

Some of the shareholders of the Bank "Opening" associated with large government agencies, and some analysts believe it was too large and influential to be able to prevent its collapse.

The Central Bank did not state what amount it allocates for the rehabilitation of "Discovery", but said that after assessing the financial position of the Bank expects to receive not less than 75% of its shares. Until now, the maximum "price" of saving banks in Russia amounted to 395 billion rubles (6.7 billion dollars) — this amount was allocated in 2011 for sanitation of Bank of Moscow, who was at that time the fifth place in Russia by total assets.

The Bank "Opening" part of a "Group "Discovery"", in recent years has grown rapidly through mergers and acquisitions of such banks as NOMOS-Bank, non-governmental pension funds and insurance companies and even purchase a diamond mine in the Russian oil producer LUKOIL. But, as said at the briefing first Deputy Central Bank Chairman Dmitry Tulin, business practices of the Bank "Opening" was questionable.

On the question of whether market participants to worry about messages about the program of sanitation of Bank "Opening", the General Director of consulting company Chantico Global's Gina Sanchez (Gina Sanchez) replied that although the Russian banking sector today is hardly in the limelight, this event is "very important".

"We're talking about the potential collapse of the banking system," she said in an interview with CNBC on Wednesday.

Sam Meredith


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