VTB will write off assets blocked due to sanctions in 2024

VTB is waiting for the adoption of amendments to the lawto reorganize assets due to sanctions. Their withdrawal from the balance sheet became the “first choice plan” after

VTB Group plans to carry out a special reorganization in 2024, as a result of which it will be able to write off assets and liabilities blocked due to sanctions, Dmitry Pyanov, deputy chairman of the board of the bank, said at a briefing. He noted that this will become possible if amendments to 292-FZ are adopted this year, which initially gave such an option to sanctioned credit institutions.

How Russian banks were allowed to get rid of frozen assets

In the summer of 2022, the authorities developed a scheme that allows banks to clear balance sheets of assets and liabilities blocked due to sanctions. Credit institutions received the right to carry out non-standard reorganization: to separate a separate legal entity, transfer to it assets frozen due to restrictions, and at the same time liabilities in the form of obligations to foreign creditors. The value of the withdrawn assets and liabilities must be equal so that the settlements on debts to creditors from unfriendly countries are performed only at the expense of the assets of the new company, that is, frozen ones. With such a reorganization, creditors from unfriendly countries will not be able to demand early repayment of obligations to them.

The amendments were adopted last summer, banks can reorganize before the end of 2023. One systemically important player has already gone through this procedure, Olga Polyakova, deputy chairman of the Central Bank, said in May, but did not name the organization.

What will VTB give reorganization

As Pyanov explained, the current regulations require the sub-sanctioned bank, which has conceived the reorganization, to offer minority shareholders a buyback of their shares. “No exceptions are made for “friendly” or “unfriendly” minority shareholders. We believe that this operation is purely in the interests of minority shareholders, and would like this reorganization to be without a mandatory offer to minority shareholders who voted against or abstained from approving this reorganization,” VTB Deputy Chairman said.

The very procedure for removing blocked assets and liabilities from the balance sheet, according to Pyanov, can have a significant positive impact on VTB's capital. He did not name the exact amount of assets that can be transferred to the new legal entity, but said that we are talking about "hundreds of billions of rubles." Previously, Pyanov estimated that the VTB Group could, through reorganization, withdraw blocked liabilities for 180 billion rubles from the balance sheet. and assets for the  same amount. The HEAD of VTB Andrey Kostin said in the summer of 2022 that the volume of frozen assets reaches 600 billion rubles.

“We clearly understand that from today until the date of spin-off, something can happen with some blocked assets, as well as with liabilities. There is a desire to transfer purely hopeless blocked assets there, ”Pyanov emphasized.

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According to him, the reorganization plan for VTB is now a higher priority than a possible exchange of blocked assets. Last summer, Kostin said that the group would like to exchange assets with foreigners and even negotiated accordingly. It followed from them that banks with "subsidiaries" in RUSSIA, which are forced to curtail business and are deprived of dividends, could give away their Russian assets in exchange for gaining control over the European structures of VTB.

VTB was “disillusioned” with the negotiations, and the reorganization became a “first-order choice,” Pyanov explained: “We understand that in the exchange of blocked assets, the stumbling block is the approval of the EU and US sanctions authorities .”

VTB has not yet decided how exactly the reorganization can take place, but the bank admits that the new structure with sanctioned assets and liabilities will be removed from the group's outline.

“In addition to judicial aspects, there is an important point that some foreign counterparties from unfriendly countries have the financial ability and the ability to pay off their obligations to the structures of the VTB Group, but the sanction status of VTB does not allow this. A transfer to the side could help solve this problem, ”Pyanov said.