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. Last Updated: 07/27/2016

SBS-Agro Gets $16M From Central Bank




On the same day it handed over a 400 million ruble stabilization credit to battered banking giant SBS-Agro, the Central Bank installed one of its own as temporary manager at the bank.


The fresh tranche of Central Bank funds was the latest installment in a 2.5 billion ruble ($100 million) stabilization loan that the Central Bank agreed to kick start last month, Prime-Tass reported Tuesday.


SBS-Agro spokesman Eduard Krasnyansky was unable to comment Tuesday on when the bank received the funds. According to an SBS-Agro press release cited by Prime-Tass, the entire sum is to be transferred as credits to the agricultural sector.


The credit would bring to 5.4 billion rubles the amount loaned to SBS-Agro under a stabilization program agreed with the Central Bank last year.


That deal committed SBS-Agro to handing over a 75 percent stake of its shares for the Central Bank to hold in trust, but it is unclear whether the bank has handed over any shares.


The appointment of Central Bank deputy chairman Georgy Luntovsky as temporary manager was necessary to enable the Agency for Restructuring Credit Organizations, or ARKO, to begin an audit to determine whether or not the bank can be restructured, ARKO spokesman Vadim Kokarev said Tuesday in a telephone interview.


Under the law on restructuring credit organizations, the Central Bank had to appoint a temporary manager before ARKO could begin its investigations. ARKO now has 30 days to conduct the audit and reach a decision on whether it will restructure the bank, or recommend its liquidation.


SBS-Agro said in a press release Tuesday it welcomed the audit by ARKO and was ready to cooperate with the agency and the Central Bank.


"This trilateral cooperation is the first since the new law on restructuring domestic banks was passed," the press release said.


SBS-Agro may well be hoping that ARKO will impose a moratorium on its debts. The new law on restructuring banks allows ARKO to initiate such a moratorium for banks it takes under its wing.


ARKO spokesman Alexander Voznesensky said he "could not exclude the possibility of a moratorium on the bank's obligations to clients," Prime-Tass reported.


However, analysts said Tuesday that a lack of funds mean both Luntovsky and ARKO face enormous difficulties in tackling SBS-Agro's estimated $1.5 billion in debts, many of which have been unserviced since the financial crisis swept through the banking system late last summer.


"In theory this should mean that restructuring SBS-Agro should be speeded up, but in practice it probably won't. The negative equity value is too big to handle," said Kim Iskyan, banking analyst at investment bank Renaissance Capital.


The Central Bank's decision to re-launch a program of so-called "stabilization" credits for SBS-Agro flies in the face of the recently signed policy agreement between Russia and the International Monetary Fund, analysts said.


Officials from the IMF and the World Bank were unavailable for comment Tuesday.


"Even the disbursal of these credits to SBS isn't going to have much of an impact on the bank," said Margot Jacobs, banking analyst at United Financial Group.


Set up by oligarch Alexander Smolensky, SBS-Agro was once one of Russia's biggest banks - and possibly the leading private bank in terms of retail deposits when the crash last year came. The bank began tottering even before the Aug. 17 devaluation but it has managed to stay afloat, partially thanks to Central Bank assistance, even as depositors and other creditors have been turned away.


Meanwhile, any moves to impose a debt moratorium may raise the hackles of the Tax Ministry, one of the staunchest opponents of such devices. However, some analysts said a debt moratorium would make little difference.