Saturday, July 2, 2011

Russia gives bank record bailout

A building of VTB, Russia's second largest financial institution, in the capital Moscow (file photo).

Source: Press TV

Russia's Bank of Moscow has received the country's largest bailout package ever worth USD 14.2 billion, following the bank's hostile takeover by a state-controlled financial institution.

The rescue package was bigger than had been expected and followed the takeover by VTB, Russia's second largest financial institution, Russia's central bank said on Friday.

By giving a bailout to Bank of Moscow, the Russian government aimed to keep the country's fifth-largest banking group afloat.

Under the bailout, Russia's central bank will fund a 10-year loan of 295 billion rubles (USD 10.6 billion) to Bank of Moscow from the Deposit Insurance Agency (DIA) at a rate of 0.51 percent, according to the Wall Street Journal.

VTB will [also] donate 100 billion rubles to recapitalize Bank of Moscow, the central bank said in a statement.

"We are certain that, thanks to the joint actions of VTB and the state, Bank of Moscow will resolve its temporary problems and reach a qualitatively new level," VTB said in a statement.

Analysts believe the move also indicates the Russian government's desire to help state-controlled VTB with its takeover of a weaker company.

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