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Russia Is Bailing out Another One of its Biggest Banks

Central Bank of Russia puts Promsvyazbank under temporary administrationCentral Bank of Russia puts Promsvyazbank under temporary administration
A branch of Promsvyazbank in Moscow, Russia.Mikhail Pochuyev—TASS via Getty Images

Russia’s central bank on Friday put the country’s 10th largest private lender by assets under temporary administration, the third such bailout in the Russian banking sector in the space of three months.

The central bank said in a statement it was providing funds to support Promsvyazbank‘s liquidity and would send in temporary administrators.

It said there would be no moratorium on Promsvyazbank meeting creditors’ claims, and that the bank was operating as normal.

“As part of measures aimed at increasing (Promsvyazbank‘s) financial stability and ensuring its continued work in the banking services market, it is planned that the Bank of Russia act as an investor using the funds of the Banking Sector Consolidation Fund,” the regulator said in a statement.

Russia’s banking sector has been under intense scrutiny since the central bank was forced to step in to save two of the country’s private lenders earlier this year.

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Otkritie Bank and B&N Bank were both subject to central bank bailouts in the space of a month after disclosing holes in their balance sheets.

Lawmaker Anatoly Aksakov, a member of the Duma finance committee and head of the Russian Banking Association, told TASS news agency Promsvyazbank‘s bailout would not affect the wider banking sector, and was the last time such a measure would be taken this year.

Sources close to Promsvyazbank told Reuters an agreement was reached late on Thursday night at a meeting between Promsvyazbank‘s co-owner and chairman, Dmitry Ananyev, and central bank governor Elvira Nabiullina.

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Promsvyazbank is Russia’s 10th biggest bank by assets, according to Interfax data. Dmitry Ananyev and his brother, Alexei, together control just over 50 percent of the bank.

In contrast to the failures of Otkritie and B&N, the news of PSB’s bailout didn’t have much of an impact on local financial markets. The ruble edged lower against the dollar Friday but was well within its recent trading range. Russia’s banking sector is dominated by two state-owned banks, Sberbank and VTB, which control around two-thirds of total deposits in the country. However, the bailout is another blow to a country that has largely failed to develop trust in private-sector banks in nearly three decades since the collapse of Communism.