Several clarifications have been provided with regard to subordinated debt instruments.
On 30 November 2013, amendments to the Bank of Russia’s Regulation 395-P, “On the Methodology of Determination of the Amount and Assessment of Sufficiency of the Capital of Credit Organizations (Basel III)”, were published. The amendments, which aim to address certain questions and concerns from Russian banks that arose from a lack of clarity in Regulation 395-P, provide for the following with regard to subordinated instruments:
The amendments also provide clarification as to which bankruptcy prevention measures under Federal Law No. 175-FZ, “On Additional Measures for Improvement of Stability of the Banking System”, will trigger a write-down or conversion into equity of Tier 2 subordinated instruments under Regulation 395-P. According to the amendments, the bankruptcy prevention measures that trigger a write-down or conversion into equity are limited to certain equity investments made in the relevant bank by the Agency for Deposit Insurance (ADI). The date on which the write-down or conversion into equity is triggered is the date on which the bank receives notice from ADI that it has adopted a decision to implement a plan contemplating such investments that was approved by the Central Bank of the Russian Federation. In addition, the Amendments indicate that, upon the occurrence of a trigger event, the obligation of the bank to repay the interest and principal under the subordinated instrument will terminate.
The amendments will come into force on 1 January 2014.