Russia Readies Emergency Loans to Contain Bank Otkritie Crisis

Bank Otkritie FC, a month removed from being Russia‘s biggest private lender, was taken over by a government-backed fund set up by the central bank to consolidate the sector. The move will place at least 75 percent of the bank in state hands and could wipe out subordinated debt holders. The rescue prompted the central bank to provide funding to other banks to contain the crisis.

Otkritie began experiencing massive deposit outflows in June, which accelerated after a surprise ratings downgrade, prompting clients to withdraw the equivalent of about $7.4 billion through July and sparking fears of contagion. While the central bank‘s offer of money to other lenders is intended to calm the market, the takeover of Otkritie will expand the state‘s already dominant role in the banking sector.