VEB Takes Over Troubled Globex

ReutersA view of the rising Moskva-City financial district. A banker said more than 100 banks are now looking for buyers.
Vneshekonombank said Friday that it would buy midsized Bank Globex, which had acute liquidity problems, making it the fourth bank among Russia's top 50 to be effectively nationalized in the past few weeks.

State-owned VEB said it would take over the troubled bank for a symbolic 5,000 rubles ($190).

"Just as we did with Svyaz Bank, we will take the whole bank and start helping it, partly with money that the Central Bank will deposit with us," VEB chairman Vladimir Dmitriyev said.

While the purchase price of 5,000 rubles is small, Dmitriyev said the state would deposit $2 billion with VEB, also known as the Development Bank, to help rescue Globex.

The Central Bank has already provided in excess of $2 billion to VEB to help midsized Svyaz Bank, so Friday's deal brings the total rescue package for the banking sector to more than $5.5 billion.

This month, the government also bailed out midsized banks KIT Finance and Sobinbank. The rescue of Sobinbank by Gazenergoprombank, a banking unit of Gazprom, cost $500 million. The gas giant's other lender, Gazprombank, opened a $1.14 billion credit line to KIT Finance.

"There are several other banks waiting for their turn," a high-level government source said late Thursday.

A senior Russian banker said more then 100 banks were looking for buyers. "There will be a very big reshuffle," the banker said.

The government will have to plan subsequent moves carefully and prioritize how it doles out its considerable -- but not endless -- resources to support the country's still nascent financial sector, analysts said.

"While we expect further failures among small banks, we believe the panic could quickly intensify if the authorities allow a deposit-rich bank to go under," analysts from UniCredit Aton said in a research note.

Russia has more than 1,300 banks, and authorities have said a crisis could help reduce the number to a more manageable level, as many of the institutions, created in the 1990s as pocket banks of large corporations, have outlived themselves.

"The news [about Globex] once again highlights the authorities' commitment to support banking-system stability, with a clear focus on top 50 banks," said David Nangle, analyst at Renaissance Capital.

The sector is due to get $36 billion as part of the state's total $210 billion rescue package, with the bulk of it set to flow via VEB, Sberbank and VTB.

Bankers say Russians unfailingly continue to pay mortgage and retail loans and keep depositing money with state banks. But nerves are fraying, even though the Central Bank has kept the ruble rate stable by injecting billions of dollars to support the currency.

"People are lost. I see some clients ending their term deposits early and putting money in safe deposit boxes. The next day, they convert rubles into dollars. On the third day, they convert them into euros and open a new deposit account. It is not yet panic, but it is close," a top banker said.