Cbank: VTB 24’s CEO to head Russia’s Otkritie FC Bank

SOCHI, Sep 14 (PRIME) -- Mikhail Zadornov, CEO of VTB 24, the retail arm of Russia’s second largest bank VTB, will become the CEO of Otkritie Financial Corporation (FC) Bank, Central Bank Chairwoman Elvira Nabiullina said on Thursday during the International Banking Forum in Sochi.

“Though the chairman of the management board will be appointed only after the interim administration have finished its work, I would like to make an announcement today in order to improve certainty and understanding of clients and counteragents of the bank, and announce that Mikhail Mikhailovich Zadornov agreed to take the position in the bank after our suggestion,” she said.

The central bank plans to file a suit against decisions of former managers of Otkritie FC Bank to accrue benefits for January–June, she also said.

“Their decision to pay an increased amount of benefits and dividends about a month or month and a half before a revocation of the license or a bailout may be seen as an attempt asset stripping. We think, that they should have limited payments of benefits and dividends, we think it is reasonable to raise a question about it,” she said.

The central bank announced a bailout of Otkritie FC Bank in late August, applying for the first time a new mechanism of majority stake acquisition in the bank with money of the banking sector consolidation fund.

FUTURE FOR OTKRITIE

Still, there is a possibility to cure Otkritie and for the bank to develop even despite all mistakes and risks of its business model, she said. “But mistakes in business of Otkritie led to the bank being unable to remain financially stable on its own, so the central bank just had to interfere,” she said.

The impact of the bailout of Otkritie FC Bank on the banking system of Russia was minimal. The sector saw no outflow of deposits from other banks, and the yield of bonds rose only by 100–150 basis points, which bears no system-wide risks.

“So, we managed to avoid a transition of problems of one large bank into a system-wide problem, but we still have to draw conclusions from this story and to change our policy in order to minimize the possibility of similar cases to happen in the future,” she said.

CASE WITH BANK JUGRA

When asked why the central bank rejected the bailout of Bank Jugra, one of Russia’s top 30 banks which lost its license in July, but approved the bailout of Otkritie, Nabiullina said that managers of Bank Jugra in fact created a pocket bank for financing of their own projects, and they aggressively evaded restrictions of the authority in attracting money from clients.

The quality of Bank Jugra’s credit portfolio was low. The bailout plan offered by the managers did not correspond with demands of the legislation, and “it supposed long-term 10-year subsidization of, in fact, business projects of individuals in different sectors of the economy by the government,” she said.

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