Enter to open, tab to navigate, enter to select
New measures introduced to support the Russian financial system
Practical Law Legal Update 8-384-8671 (Approx. 3 pages)
New measures introduced to support the Russian financial system
by White & Case LLP
| Published on 04 Feb 2009 • Russian Federation |
Speedread
A new law has been passed to allow the Bank for Development and Foreign Trade (VEB) to help eligible borrowers discharge their debt obligations to foreign entities for a period of time. The new law also temporarily allows the Central Bank to compensate, in certain circumstances, credit organisations for losses made on the interbank credit market.
On 13 October 2008 the President signed Federal Law No. 173-FZ "On Additional Measures for the Support of Financial System of the Russian Federation". The Law entered into force on 14 October 2008.
VEB's authority. According to the Law, the Bank for Development and Foreign Trade (VEB) is entitled, from 14 October 2008 until 31 December 2009, to:
- Grant foreign currency loans to borrowers (see below) so that they can repay and service loans obtained before 25 September 2008 from foreign organisations.
- Acquire claims against borrowers from foreign creditors under obligations incurred before 25 September 2008.
The criteria to be met by the borrowers as well as the terms and conditions for granting the loans are set by the VEB's Supervisory Board. The eligible borrowers include:
- Legal entities registered under Russian law.
- SPVs, including those registered abroad, established to own debts being refinanced.
The total amount of loans granted by VEB, as well as claims acquired by VEB, must not exceed US$50 billion (for more details, see VEB's website).
To enable VEB to grant such loans, the Central Bank is entitled to place deposits with VEB for up to US$50 billion for one year (this term may be further extended).
In addition, funds of the state Fund for National Welfare may be placed with VEB for up to RUB450 billion (about US$13.7 billion) until 31 December 2019. These funds may be used for granting unsecured subordinated loans to VTB Bank, Russian Agricultural Bank and certain other Russian banks that meet the criteria set by this Law. Additional criteria to be met by the borrowers as well as the terms and conditions for granting such loans are set by the VEB's Supervisory Board (for more details, see VEB's website).
Central Bank's authority. The Central Bank is entitled, from 14 October 2008 until 31 December 2009, to enter into agreements with credit organisations providing that the Central Bank will partially compensate their losses (or expenses) suffered as a result of concluding deals (within the above period) in the inter-bank credit market with credit organisations whose banking licences are later revoked.
In addition, the Central Bank is entitled to grant unsecured subordinated loans to Sberbank for up to RUB500 billion.