Russia: Otkritie Bank Capital Injection, 2017

On August 29, 2017, following a request from Otkritie’s shareholders amidst a depositor run, the CBR announced that it would inject capital into Otkritie through a newly established CBR subdivision, the FBSC. Otkritie was designated as a systemically important bank and, just before the announced bailout, was the largest privately owned bank in Russia and the eighth-largest bank overall, with RUR 2.45 trillion assets and RUR 539 billion of citizens’ savings and deposits (CBR 2017f; Dementyeva et al. 2017; Karpova and Kruglikova 2018). The CBR’s bailout was the largest in Russia’s history and the first usage of the new resolution mechanism, FBSC. An alternative option to the new resolution mechanism included revoking Otkritie’s license and going through liquidation with the DIA, which likely would have caused a greater run. At the time of the CBR’s intervention, the DIA lacked funding and given the size of the banks in distress, new bank contributions could not have covered the scale of potential reimbursements. As was precedent, the CBR could have financed resolutions by lending to the DIA, which managed bankruptcy proceedings, though this mechanism was often costlier than just reimbursing insured deposits (Drobyshevsky, Trunin, and Khromov 2017). The CBR also had the option of extending rehabilitation loans to private market buyers, and at least one bank volunteered to participate under this scheme during Otkritie’s bailout (Interfax 2020). The CBR, however, opted for the new mechanism as the old program tended to cost more, resulted in protracted restructurings, and created unfair competitive dynamics with acquired banks receiving regulatory forbearance and buyers’ misaligned incentives (CBR 2018c; Nabiullina 2017a).

The capital support from the CBR ensured the continuity of Otkritie’s banking operations, and the CBR appointed a provisional administration, primarily composed of CBR officials, to manage and inspect the bank before injecting capital (CBR 2017a; CBR 2017f).

On September 15, the CBR approved a plan to recapitalize Otkritie and provide funds to ensure the bank’s liquidity (CBR 2017b). The day prior, CBR Governor Nabiullina gave a speech in which she explained two justifications for bailing out Otkritie as compared to a smaller bank, Yugra Bank, whose banking license the CBR had revoked. First, Otkritie was considered systemically important, as one of the largest banks in Russia with strong links to other banks, pension funds and insurance companies, whereas Yugra Bank was relatively isolated from the broader financial system. Second, Otkritie Bank had a viable business model as a bank and could thus be “repaired” through financial support (that is, recapitalized); in contrast, Yugra Bank’s model revolved around attracting deposits to finance its owners’ risky ventures (Nabiullina 2017b).

In September and October 2017, the CBR-staffed provisional administration audited Otkritie’s financials to determine the size of the capital hole (Interfax 2017b; Seddon 2017g; WPS 2017b). The capital shortfall exceeded the CBR’s initial expectations, and the CBR planned to bail in the bank’s subordinated creditors in early November as a prerequisite for the capital injection (Fitzgeorge-Parker 2017). The proceeds of the recapitalization, which took place in December 2017, enabled Otkritie Bank to comply with the capital adequacy ratio of 8% and other requirements, as well as providing financing to the banking group’s subsidiaries (CBR 2017j).

Before it recapitalized Otkritie, the CBR extended substantial liquidity support both through its standing facilities and in ad hoc forms. In August 2017, Otkritie borrowed RUR 728 billion from the CBR, which included an unsecured ad hoc loan (Seddon 2017e). The CBR’s provision of unsecured loans had not been used since the Global Financial Crisis (WPS 2017a). By January 1, 2018, Otkritie had outstanding RUR 380 billion in “short-term” liquidity support from the CBR (CBR 2018c, 110). The CBR provided such liquidity support in the form of deposits using funds from the FBSC (CBR 2018d; CBR 2019; Otkritie 2019).

On September 1, 2017 (announced on September 4), the CBR introduced a new, broadly defined emergency liquidity facility for banks that had exhausted all other liquidity sources. Eligibility was under the discretion of the CBR, which would consider a bank’s systemic importance and solvency before approving draws. Approved banks could pledge collateral outside the CBR’s Lombard List (collateral accepted for standard facilities), claims on nonfinancial institutions, and other types of securities. Liquidity could take the form of a repo and/or secured loan, depending on the collateral, would have a maximum term of 90 days, and a rate of 1.75% over the CBR policy rate (CBR 2017g). For details on the CBR’s ad hoc emergency liquidity support to Otkritie, see Hoffner (forthcoming).

The legal authority for the CBR to inject capital into a distressed bank is enumerated in the June 2017 amendments to the 2002 Federal Law on the Central Bank of the Russian Federation (CBR Law) and the 2002 Federal Law on Insolvency (Bankruptcy Law) (Russian Federation 2002c; Russian Federation 2002b). The Duma amended both laws in the months before Otkritie’s rescue with the legal adoption of the CBR’s new rehabilitation (bankruptcy prevention) mechanism, which enabled the CBR to inject capital directly into banks through the FBSC, a subdivision of the CBR (CBR 2017e; CBR 2018c; Nabiullina 2017a).

Under Article 75 of the amended CBR Law, the CBR may, using monetary assets of the FBSC, “acquire shares (stakes in the authorised capital) of credit institutions subjected to bankruptcy-prevention measures, including at prices exceeding their nominal value” (Russian Federation 2002a, art. 75). Article 76 provides for the establishment of the FBSC Asset Management Company LLC (FBSC AMC) by the CBR as the sole shareholder (CBR 2018c; Russian Federation 2002a, art. 76.10). The FBSC AMC is authorized to manage, as a trustee, transferred bank shares and subordinated liabilities from the CBR (Russian Federation 2002a, arts. 75–76). On the other hand, the FBSC is not a legal entity but rather a fund formed out of the monetary assets of the CBR, as allocated by the CBR’s board of directors (Russian Federation 2002a, arts. 75–76).

Under Russian bankruptcy law, the CBR’s recapitalization is considered a bankruptcy prevention measure. Such measures shall be taken in the following cases, in which a bank:

• Repeatedly fails to satisfy claims of creditors over the past six months and/or fails to make tax (mandatory) payments within three days of the due date to due insufficiency of funds
• Allows an absolute decrease in capital (own funds) by more than 20% of trailing twelve month maximum, and simultaneously violates a mandatory ratio set by the CBR
• Violates a capital adequacy ratio set by the CBR
• Violates by more than 10% the current liquidity ratio, set by the CBR, during the past month
• Allows for a decrease in capital at the end of a reporting month below the bank’s authorized capital laid out in its constituent documents registered with the CBR (bankruptcy prevention measures not take if the bank has held a license for under two years). (Russian Federation 2002d, art. 189.10)

Should a bank meet any of the criteria for bankruptcy prevention, the bank must notify the CBR of any board meetings as well as material financial transactions: transactions with the bank’s affiliated entities and interested parties, asset sales greater than 1% of the book value of the bank’s total assets and/or in excess of RUR 15 million, and additional liabilities and capitalizations (all must be notified within five days of the transaction) (Russian Federation 2002d, art. 189.11).

During its term, the provisional administration may reduce the bank’s authorized capital to the value of its existing capital base (own funds) or to RUR 1, increase the bank’s authorized capital through issuing shares, make use the bank’s reserves and other funds to cover losses, sell assets in accordance with a plan for the participation of the Deposit Insurance Agency, open/close bank branches, and decide to liquidate the bank (Russian Federation 2002d, art. 189.34, 49). Notably, these powers do not include bailing in subordinated creditors. The subordinated creditor bail-in that the CBR implemented for Otkritie required the passage of a new federal law, which amended this statute of the Bankruptcy Law, on November 25, 2017 (CBR 2017i; Prime News 2017b).

On October 30, the CBR-appointed provisional administration failed to reach the necessary quorum (shareholders in attendance) at Otkritie’s shareholder meeting to bail in creditors (Astapenko 2017; WPS 2017b). The CBR requested amendments to the Bankruptcy Law, which the Duma passed on November 25. On November 29, the CBR transferred the powers of provisional administration to the FBSC AMC, which enabled the provisional administration to bail in the subordinated creditors and equity holders (CBR 2017i; Pashutinskaya and Bozhko 2017b; Prime News 2017b).

Before the appointment of the FBSC AMC, Otkritie’s general shareholder meeting had been scheduled for December 8, 2017, at which shareholders would vote over the recapitalization of the bank. Otkritie Holding (the parent company of Otkritie Bank), together with an affiliated company (Otkritie N LLC), owned more than 50% of the voting shares of Otkritie (prior to the CBR’s recapitalization) and were expecting to vote against the recapitalization at this upcoming meeting. Once the FBSC AMC authorized the recapitalization and canceled the shareholders meeting, Otkritie Holding’s legal team publicly criticized the CBR (and FBSC AMC) for having done so without properly notifying the shareholders; Otkritie Holding, did not, however, challenge the CBR in court. Legal experts maintained that the CBR was well within its right to recapitalize Otkritie without existing shareholder approval. A partner at a Russian law firm cited Article 189.34 of the Bankruptcy Law, providing for the suspension of shareholder powers during the tenure of the FBSC AMC, and as such, Otkritie Holding’s votes had no legal force (Pashutinskaya and Bozhko 2017b).

The CBR’s board of directors administered the capital injections through the Fund for Banking Sector Consolidation, a recently introduced special purpose vehicle staffed by the CBR (CBR 2017e; CBR 2017f; CBR 2018c; Russian Federation 2002a, art. 76). The CBR established the FBSC in July 2017 as part of a new resolution mechanism, following approval by the State Duma and pursuant to the Bankruptcy Law (CBR 2017e; CBR 2018c; Nabiullina 2017a). As the sole participant, the CBR also set up the FBSC Asset Management Company LLC with an initial authorized capital of RUR 1.5 billion. The FBSC AMC’s responsibilities are to implement bankruptcy prevention measures approved by the CBR’s board of directors (that is, bank recapitalizations), perform financial analyses, and serve in the provisional administration of banks (CBR 2018c).

On November 29, 2017, the CBR assigned to the FBSC AMC the functions of provisional administration for Otkritie, noting the recent passage of a federal law that expanded the powers of a provisional administration in bankruptcy prevention (CBR 2017d; CBR 2017i). On December 21, 2017, the FBSC AMC handed over administrative powers to newly created, permanent management bodies, with the CBR forming Otkritie’s supervisory board. The new supervisory board included two CBR officials, the deputy finance minister, and representatives from the Moscow Exchange, UBS, and the European Bank for Reconstruction and Development (Prime News 2017c). The supervisory board subsequently appointed a new management board, with Mikhail Zadornov as CEO of Otkritie, effective January 1, 2018 (Otkritie 2018). Zadornov served as the Russian finance minister during the 1998 ruble crises and founded VTB24, a retail bank acquired by VTB (Seddon 2017d).

After acquiring the ordinary shares of a bank such as Otkritie, the CBR transfers the shares in a trust to the FBSC. The FBSC exercises all powers as the bank’s owner but must receive approval from the CBR before selling such shares (CBR 2018c).

In December 2017, the CBR subsequently placed the shares of Otkritie in a trust with FBSC AMC, with the plan to sell the shares to a market investor following Otkritie’s rehabilitation. Before the recapitalization of Otkritie, the CBR had set up FBSC AMC as an LLC, for which it owned 100% of the authorized capital of RUR 1.5 billion (CBR 2018c).

As part of the eventual sale of Otkritie to VTB Bank in December 2022, the CBR used an independent appraiser, AO Business Solutions and Technologies, to estimate the market value of Otkritie (CBR 2022).

Pursuant to Article 76.12 of the CBR Law, the chief auditor of the CBR assesses annually the operational efficiency of the FBSC in performing its goals and ensuring maximum return on investment, in accordance with various international and domestic auditing standards (CBR 2018c). The audit looks to four main areas in assessing the use of funds for the rescue of banks, with Otkritie being the first bank rescued by the FBSC:

• Comparative efficiency of the amount of funds allocated by the Bank of Russia against the amount of damage to the economy in case the scenario of the credit institution’s bankruptcy materialises.
• The optimal resource utilisation for the recovery of credit institution financial position indicators.
• The efficiency of utilisation of funds by the credit institution’s management.
• The efficiency of the sale of shares of the credit institution by the Bank of Russia given the market situation. (CBR 2018c, 109)

The CBR estimated that the cost of Otkritie’s resolution under the old mechanism (with 10-year rehabilitation loan through the DIA) would have been almost double the RUR 456.2 billion capital injection (CBR 2018c).

The decision to reduce the authorized capital of a bank (for example, Otkritie) is made by the Banking Supervision Committee of the CBR, and a notice must be published in the CBR’s bulletin within 10 days of the decision date (Russian Federation 2002d, art. 189.50).

On August 25, 2017, four days before the CBR announced the recapitalization, Otkritie’s shares fell 8% after a report of a potential CBR intervention (Seddon 2017c).

On August 29, 2017, the CBR announced the rescue of Otkritie through a press release, which did not disclose any figures for the scale of the intervention. The press release stated that creditors would not be bailed in and that a moratorium on payments would not be applied (CBR 2017f). Within a day, the CBR clarified that it intended to take over at least 75% ownership in the bank, with the remaining stake retained by the former owners, assuming that the CBR did not discover a capital shortfall (Dementyeva et al. 2017). The CBR also provided more detail for the rehabilitation process, which would take place in two stages, altogether lasting an estimated six to eight months:

• Stage 1 (1–3 months): The CBR appoints a provisional administration, suspending the powers of executive bodies, with the continuation of meetings of the board of directors and shareholders. The new administration assesses Otkritie’s condition, and if its capital is revealed to be less than 2%, the bank’s subordinated creditors will be converted into minority shareholders. The CBR will approve a plan to participate in the rehabilitation of Otkritie.
• Stage 2 (3–5 months): Shareholder rights will temporarily be suspended until the completion of the provisional administration’s work. Otkritie’s authorized capital will be adjusted to the true capital level, as discovered in the provisional administration’s audit. If the capital is negative, Otkritie will issue new shares to the CBR. Lastly, a new administration will be appointed (CBR 2017a; Dementyeva et al. 2017).^FNOn December 21, 2017, the CBR appointed a new management team, headed by Mikhail Zadornov, former finance minister and founder of the retail bank VTB24 (Prime News 2017c; Seddon 2017d). See Key Design Decision No. 4, Administration, for more information.

The CBR said that it would not provide an estimate for the cost of the intervention until after an audit of Otkritie’s financials (Zubkov 2017). The CBR’s initial announcement of the Otkritie intervention was neutral in tone and did not detail the cause of the bank’s distress (Lokshina, Gaidev, and Polyakova 2017). Weeks later, on September 14, CBR Governor Nabiullina addressed the situation in more detail, this time stating that Otkritie had engaged in excessive risk-taking and implying that Otkritie’s substantial purchases of 2030 Eurobonds (dollar-denominated Russian sovereign debt), in which Otkritie owned the majority of issuance, enabled the bank to manipulate the bond’s market price and mask its capital hole (Nabiullina 2017b; Seddon 2017d). Nabiullina also stated that the CBR planned to legally challenge the payment of executive bonuses for the first half of 2017, just before Otkritie’s collapse. In the same speech, Nabiullina reiterated the bank’s systemic importance, strong integration into the Russian financial system, and viable banking model, in juxtaposition to Yugra Bank, which the CBR had allowed to fail (Nabiullina 2017b). In a comment about the eventual sale of the CBR’s stake in Otkritie, Nabiullina said, “We do not seek to increase the state’s share in the banking sector” (Nabiullina 2017b).

The initial news of the CBR’s intervention was received positively by the market, with shares in the Moscow stock exchange’s financial sector index rising 2.2% and Otkritie’s large shareholder, VTB, up 8%, after several days of repeated losses (Ostroukh, Garasyuta, and Kobzeva 2017).

In the initial announcement on August 29, the CBR noted that creditors would not be bailed in for the rehabilitation of Otkritie Bank (CBR 2017f). Within a few days, the CBR clarified that subordinated debt holders would be converted into shareholders if a financial audit of Otkritie revealed a capital ratio of less than 2% (Dementyeva et al. 2017). In the process of the audit, Otkritie revealed negative capital of RUR 188.9 billion on October 1, 2017, which grew to RUR 300 billion as of November 1, 2017 (Interfax 2017b; Seddon 2017f; WPS 2017b). Legal obstacles prevented the CBR from promptly bailing in the subordinated creditors (Astapenko 2017; WPS 2017b). On October 30, the CBR-appointed provisional administration failed to reach the necessary quorum at Otkritie’s shareholder meeting to write down the covenants (Astapenko 2017; WPS 2017b). The CBR requested amendments to the Bankruptcy Law, which the Duma passed on November 25, 2017 (see Key Design Decision No. 3, Legal Authority). On November 29, the CBR transferred the powers of provisional administration to the FBSC AMC, which enabled the provisional administration to impose losses on the subordinated creditors and equity holders (CBR 2017i; Pashutinskaya and Bozhko 2017b; Prime News 2017b). By December 3, the provisional management had written off subordinated debts worth RUR 160 billion (dollar-denominated bonds of USD 1.5 billion and ruble bonds of RUR 72 billion) and written down the value of existing shares to RUR 1 (Fojcik 2017b).

Despite the write-off of Otkritie’s subordinated debt, at least one issue of written-off Eurobonds continued to trade over the counter through December 2017. In January 2018, Vedomosti reported that a recent transaction of USD 250,000–500,00 occurred in mid-December for a portion of these Eurobonds. The ability to conclude the transaction indicated that Otkritie had not notified market participants of the write-off of these bonds. In January, there were still investors submitting buy order for these subordinated securities for 10–20% of their nominal value. Furthermore, investors in these bonds did not agree with the CBR’s write-off and intended to challenge the decision in the London Court of International Arbitration, though research could not determine whether a lawsuit had been filed (Astapenko 2018).

In addition to subordinated creditors, the CBR also terminated Otkritie Bank’s liabilities to controlling entities and to executive employees (CBR 2018c).

The recapitalizations (the first in December 2017 and the second in June 2018) took the form of ordinary shares with voting rights, which the CBR said it intended to sell to the market after implementing resolution measures (CBR 2018c).

Otkritie did not pay dividends for the 2017 fiscal year, but it did pay RUR 2 billion to the CBR for 2018 (CBR 2020).

On September 1, 2017, days after the announced intervention into Otkritie, the CBR deputy governor, Vasily Pozdyshev, provided an estimate for the amount of funds needed to rehabilitate Otkritie: between RUR 250 and RUR 400 billion. On August 1, the last reporting date, Otkritie Bank reported capital of RUR 270 billion, a corporate loan portfolio of more than RUR 750 billion, and securities of RUR 687 billion (Kalyukov, Titova, and Pashutinskaya 2017).

Estimating the true size of the Otkritie’s financial needs was made difficult by the complex relationship between Otkritie Bank and its parent company, Otkritie Holding, particularly regarding the significant lending from the former to the latter (Kalyukov, Titova, and Pashutinskaya 2017).

Russia’s bankruptcy law mandated that the CBR acquire at least 75% of a bank’s equity during a recapitalization. The law also required the CBR to write down a bank’s authorized capital to the value of actual capital; if a bank had negative capital, the CBR would write down authorized capital to RUR 1 (Russian Federation 2002d, art. 189.49).

In December 2017, the CBR injected RUR 456.2 billion into Otkritie through an additional issue of ordinary shares, which left the CBR with 99.9% ownership (CBR 2018c). As of November 1, 2017, the aggregate capital of Russian banks amounted to RUR 9.3 trillion, rendering this injection into Otkritie equivalent to almost 5% of the sum (Krivorotova, Mikheeva, and Litov 2017). In June 2018, the CBR injected additional capital into Otkritie, purchasing RUR 42.7 billion in newly issued ordinary shares in Otkritie (CBR 2018b). Most of the proceeds were used to provide relief to the subsidiaries Otkritie had purchased in August 2017. RUR 8.9 billion was provided for additional capital for Otkritie (CBR 2018b).

In July 2017, Otkritie experienced a deposit run after the Russian rating agency ACRA rated Otkritie at BBB-, its lowest investment-grade rating—and thus below the acceptable threshold for holding deposits of state entities and pension funds (Novye Izvestiia 2017; Seddon 2017b). During the month of August, Otkritie borrowed heavily from the CBR to replace the outflow of deposits (Seddon 2017e). The CBR announced the bailout of Otkritie on August 29, 2017, as the first of several banks to be rescued (CBR 2017f). Over the next two months, the CBR-staffed temporary administration audited Otkritie’s financials to determine the size of the capital hole (Interfax 2017b; Seddon 2017g; WPS 2017b). The capital shortfall exceeded the CBR’s initial expectations, and the CBR planned to bail in the bank’s subordinated creditors in early November as a prerequisite for the capital injection (Fitzgeorge-Parker 2017). Legal obstacles, namely the requirement that the temporary administration reach a quorum at the shareholder meeting to change covenants, postponed the bail-in. On November 25, the passage of the CBR’s requested legal amendments enabled the temporary administration to bail in RUR 160 billion subordinated claims and write down equity to RUR 1 by the beginning of December (CBR 2017i; Fojcik 2017b; Prime News 2017b).

On December 11, the CBR announced that it had recapitalized Otkritie Bank with RUR 456.2 billion through a new issue of ordinary shares, equivalent to a 99.9% stake (CBR 2017j; CBR 2017k).

On June 29, 2018, the CBR announced an additional recapitalization, providing RUR 42.7 billion in newly issued ordinary shares in Otkritie. Most of the proceeds were used to provide relief to Otkritie Holding’s subsidiaries, with RUR 8.9 billion directly for Otkritie’s capital (CBR 2018b). The recapitalization enabled Otkritie to comply with regulatory capital ratios (CBR 2019).

In 2019, the CBR completed bankruptcy prevention measures after Otkritie had achieved the financial rehabilitation targets (CBR 2020).

In 2018, the CBR decided to reorganize Otkritie Bank, along with other large distressed private banks, while continuing to operate it as a going concern. On January 1, 2019, the CBR merged Otkritie and B&N Bank under a newly established universal financial group, Otkritie Group (CBR 2019). In 2018, the CBR also established a bad bank, the noncore asset bank (NAB), which received noncore and toxic assets of banks in which the CBR had intervened (CBR 2019). The CBR provided the bad bank with a RUR 1.1 trillion loan at a 0.5% interest rate. The bad bank recovered and liquidated the distressed assets over time, returning to the CBR the funds allocated for resolution (Larina 2019; Seddon 2018). The NAB operated with a banking license (Sherunkova 2021).

Pursuant to the Bankruptcy Law, the CBR appointed a provisional administration to run Otkritie Bank for six months, while suspending the powers of Otkritie’s management (CBR 2017a; CBR 2017f). The CBR appointed the deputy director of the CBR’s financial resolution department to chair the provisional administration followed by two deputy chairs, the director of the CBR’s banking supervision department, and one official from the FBSC. The provisional administration also included roughly 30 other CBR employees (CBR 2017a). Under the Bankruptcy Law, the term of the provisional administration, appointed by the CBR, cannot exceed six months; and if the conditions for the appointment of the provisional administration remain, the provisional administration will request that the CBR revoke the bank’s license. After the revocation of the license, until an arbitration court appoints a liquidator, the provisional administration will continue to manage the bank (Russian Federation 2002d, art. 189.27).

Following the appointment of the provisional administration, various powers of the bank’s existing managing bodies are suspended and rights of the bank’s founders (participants) associated with participation in its authorized capital (that is, convening shareholder meetings) are waived (Russian Federation 2002d, art. 189.34).

As part of recapitalization, the CBR terminated Otkritie’s liabilities to executive employees (CBR 2018c). Under the Bankruptcy Law, the termination of the bank’s obligations to executive employees takes place on the day of the approval of the CBR’s plan to participate in bankruptcy prevention of the bank (Russian Federation 2002d, art. 189.49). Such obligations do not include payroll contracts (and exclude bonuses and other incentive compensation).

Pursuant to Russia’s Bankruptcy Law, beginning once the CBR demands a bank enter into financial rehabilitation (after satisfying the bankruptcy prevention conditions) and lasting until receiving permission from the CBR, the bank is prohibited from making decisions related to the distribution of profits to its founders, payment or announcement of dividends, and share repurchases, if these decisions lead to noncompliance with the CBR’s mandatory ratios (Russian Federation 2002d, art. 189.11). If the persons controlling the bank are found responsible for its bankruptcy, they are held responsible for subsidiary liabilities in the amount equal to the unpaid creditors’ (Russian Federation 2002d, arts. 61, 189.23).

The CBR’s initial RUR 456.2 billion recapitalization of Otkritie in December 2017 apportioned RUR 189.1 billion to cover the capital deficit of the bank, RUR 182 billion for the formation of new capital, and the remainder allocated for Otkritie to provide financial assistance to its subsidiaries, including Rosgosstrakh insurance company (RUR 42.2 billion) and nonstate pension funds (RUR 42.9 billion) (CBR 2017j). The CBR, however, excluded Otkritie’s subsidiary Trust Bank from the recapitalization; that bank was subsequently used in 2018 as the basis for a bad asset bank in restructuring (CBR 2018d; CBR 2019).

In July 2019, the CBR completed its bankruptcy prevention measures into Otkritie, with the bank having met its rehabilitation targets. In 2019, Otkritie paid dividends of RUR 2 billion for 2018. Thereafter, the CBR developed a plan to divest from its stake in Otkritie (CBR 2020).

On September 26, 2017, the CBR noted that Otkritie’s capital had fallen below the statutory requirements for more than six days in the past 30 trading days, as established in CBR Regulation No. 395-P, Sections 2.3.4 and 3.1.8.1.2 (CBR 2017c). Nevertheless, the CBR continued to guarantee the bank’s operations by placing a large volume of deposits in the bank before the capital injections in December 2017 and June 2018 (CBR 2018d; CBR 2019).

The CBR’s initial plan did not specify an exit date but estimated the rehabilitation would take an estimated six to eight months divided into two stages (Dementyeva et al. 2017; WPS 2017b). In the first stage, the CBR would appoint a provisional administration, assess Otkritie’s financials, determine the level of necessary capitalization and bail-in measures, and approve a rehabilitation plan for the bank (Dementyeva et al. 2017; WPS 2017b). In the second stage, the CBR would recapitalize the bank and appoint a new management (Dementyeva et al. 2017; WPS 2017b). The CBR intended to eventually sell Otkritie back to the market, with CBR Governor Nabiullina stating, “We do not seek to increase the state’s share in the banking sector” (Nabiullina 2017b).

Toward the end of September 2017, the CBR said that it planned to sell Otkritie (and B&N Bank) in two years, pending market conditions (Prime News 2017a). In 2018, the CBR decided to restructure Otkritie and merged it with B&N Bank in January 2019 (Fojcik 2019). By December 2018, Otkritie had returned all its borrowed CBR funds (WPS 2018). In December 2019, the CBR stated that it aimed to sell Otkritie in 2021, beginning with an initial public offering (IPO) of 20–25% of its shares. The CBR highlighted three conditions to selling shares in the banks it bailed out: the buyers would be private, nonstate companies and exclude former shareholders or controlling parties; and the sales would not create monopolies in certain market sectors (Interfax 2019).

Owing to market conditions, the CBR could not sell Otkritie at IPO and opted to sell the bank to state-owned VTB Bank. In December 2022, the CBR sold 100% of its stake in Otkritie to VTB Bank for RUR 340 billion. The passage of a new law in March 2022 enabled the CBR to sell shares in Otkritie at the market value, as estimated by an independent appraiser at RUR 328 billion to RUR 374 billion (see Key Design Decision No. 3, Legal Authority). VTB paid RUR 233.1 billion in cash and RUR 106.9 billion in federal government bonds (CBR 2022).