REUTERS
The Russian Finance Ministry is considering the possibility of applying a bail-in mechanism to the deposits to individuals, which is a forced conversion of the claims of creditors of the third line into subordinated liabilities or share capital of troubled banks, Meduza.io reported citing Deputy Finance Minister Aleksey Morozov.
"The threshold is not yet determined, but it will be very significant. We're talking about tens of millions of rubles as a minimum," he said, commenting on the deposits to apply the bail-in mechanism to. According to the minister, the deposit is expected to be at least RUB 100 million ($1.29 million) to fall under the proposed scheme.
The bail-in mechanism, also known as the "deposit haircut" was widely applied during the banking crisis in Cyprus in 2013, when large depositors and creditors of Bank of Cyprus were forced to become its shareholders.
Read also"We have lost": Sberbank of Russia's CEO calls Russia "downshifter state"The issue of the introduction of bail-in procedures was raised in March 2015 by the Russian Deposit Insurance Agency (DIA). According to DIA, this would minimize the cost of bank bailouts. At the end of 2015, Elvira Nabiullina, Russia’s central bank governor, also joined the discussion on this issue.
"Currently, bail-in is not stipulated by Russian legislation, but is still practiced. With the help of this mechanism, Tavricheskiy Bank and Fundservicebank were sanitized, whose major customers are Lenenergo and Roskosmos, respectively, were forced to convert funds in these banks in subordinated liabilities. Also, the central bank plans to apply bail-in to save Vnesheconombank," reads the report.