Ukrainian bank subsidiary turns to Russian state-owned parent for support
As reported in Kommersant on 13 February 2013, Ukraine’s Prominvestbank, one of the country’s oldest banks and regularly ranked in the top ten in terms of retail savings, has appealed to its parent, Russian state-owned corporation Vnesheconombank (official English name – Bank for Development and Foreign Economic Affairs), for almost USD 800 million in financial assistance, including USD 400 million in the first quarter of 2013, as it is undercapitalised based on the requirements stipulated by International Financial Reporting Standards [IFRS]. The bank needs to create 100 per cent provisions for bad debt, thereby adversely affecting its capital.
Vnesheconombank owns 98 per cent of the bank and will no doubt adhere to this request. This is the first time, however, that the Russian state, represented by Vnesheconombank, has had to provide assistance of this kind to a foreign subsidiary.
As Ukrainian banks have only just had to start making the transition to IFRS (effective from 1 January 2013), there has to be cause for concern for other institutions that don’t have such a wealthy patron, given the sorry state of Ukraine’s economy.
Of course, this might lead to some interesting M&A transactions/share swaps.
3kopecks 