Central Bank intends to oblige banks to disclose in their annual reports information on the public debt - the conditions under which such debts should be repaid ahead of schedule. This step will allow bank customers to warn of the possibility of such payments, which can destabilize the bank, according to the Central Bank. According to the participants of the banking and capital markets, the information requested to disclose, or disclosed or that, or did not give unqualified investors.
The Bank of Russia is considering the possibility to oblige banks to disclose covenants - the conditions which under certain circumstances (change of ownership, the violation of norms, etc.) to creditors the right to demand early performance of debt - as part of annual reports, said yesterday the deputy chairman of the Central Bank Alexei Simanovsky. "I have instructed the department of banking regulation and supervision of work on this issue," - he said, adding that a decision can be made later this year. If this happens, the information about the covenant will have to bank on the basis of reports in 2012. According to Mr. Simanovsky, the regulator has not yet decided which ones borrowing will address the new requirements - just as Eurobonds or syndicated loans, but "the perimeter would be logical to do as much as possible."
At present, the issue of Eurobond issuer must disclose the covenants in the prospectus to be released, this information is public, although not included in the reporting banks. In the case of syndicated loans for the public disclosure of additional conditions is performed. According to Mr. Simanovsky, covenants require the disclosure is directed primarily at protecting the interests of clients of the bank: it will give them information about possible substantial payments to bank creditors, which could destabilize its work.
The fact that this situation is not speculative, showed the Bank of Moscow during the change of shareholders (currently 94.84% of its shares owned by VTB Group). Last summer, Bank of Moscow was found nedorezervirovanie $ 150 billion rubles., Because of what the bank could not in time (until June 30) to form a reliable reporting under IFRS. Failure to report the same to this date has been one of the covenants on Eurobond bank to $ 1.65 billion (almost 50 billion rubles.) - Though that, according to the rating of "Interfax", in the second quarter equity of the Bank of Moscow was 54.4 billion rubles . As a result, Bank of Moscow's Eurobond allowed a technical default, which is not outgrown in a month in real only because the Bank published a report in the last day of the allotted time.
Bankers felt the requirement of the Central Bank to disclose information in the accounts of the covenant unnecessary. "This is not the world practice, and covenants on Eurobond as disclosed in the prospectus to be released, in most cases the standard conditions, so I see no need to include them in the annual report, especially since it clearly does not fit into this document - says financial Director Alexander Morozov Savings .- With regard to syndicated loans, it is bilateral deals covenants on them are not public and should be known to the parties of the transaction, why should they publish, it is not clear at all. " According to him, the initiative will only add to the bankers work in preparing the annual report, but will not make the market more transparent. "I do not think that the public disclosure by banks on debt covenants is an urgent need - agrees deputy president of the Eugene Transcapitalbank Ivanovo .- The investors involved in the transaction, and so knowledgeable, and knowledge of individuals in terms of commitments will have little effect." The problem may be that the covenants on eurobonds are formulated in accordance with English law and market practice and a number of terms there is no adequate Russian counterparts (prospectuses for Eurobond issues are published in English), adds a credit analyst, "Renaissance Capital" Michael Nikitin.
As regards the situation with the Bank of Moscow, the publication of the covenants in its report for 2010 is unlikely to improve understanding of its financial condition uninformed customers, when published report, to correctly assess the financial position of the bank could not even experts, chief strategist at IG indicates BCS Maxim Shein.
Pros in the initiative of the Central Bank found a professional stock market participants. According to portfolio manager of the company "Discovery Capital" Eugene Vorobiev, disclosure of the covenant would be useful to qualified investors. "This would allow them to predict the prospects of the bank, having better information about possible payment on the basis of covenants when making decisions to invest in its securities," - he said. For this to work, said Mr. Vorobyev, you need to publish data on covenants more often than once a year - for example, in the form of material facts.
The Bank of Russia is considering the possibility to oblige banks to disclose covenants - the conditions which under certain circumstances (change of ownership, the violation of norms, etc.) to creditors the right to demand early performance of debt - as part of annual reports, said yesterday the deputy chairman of the Central Bank Alexei Simanovsky. "I have instructed the department of banking regulation and supervision of work on this issue," - he said, adding that a decision can be made later this year. If this happens, the information about the covenant will have to bank on the basis of reports in 2012. According to Mr. Simanovsky, the regulator has not yet decided which ones borrowing will address the new requirements - just as Eurobonds or syndicated loans, but "the perimeter would be logical to do as much as possible."
At present, the issue of Eurobond issuer must disclose the covenants in the prospectus to be released, this information is public, although not included in the reporting banks. In the case of syndicated loans for the public disclosure of additional conditions is performed. According to Mr. Simanovsky, covenants require the disclosure is directed primarily at protecting the interests of clients of the bank: it will give them information about possible substantial payments to bank creditors, which could destabilize its work.
The fact that this situation is not speculative, showed the Bank of Moscow during the change of shareholders (currently 94.84% of its shares owned by VTB Group). Last summer, Bank of Moscow was found nedorezervirovanie $ 150 billion rubles., Because of what the bank could not in time (until June 30) to form a reliable reporting under IFRS. Failure to report the same to this date has been one of the covenants on Eurobond bank to $ 1.65 billion (almost 50 billion rubles.) - Though that, according to the rating of "Interfax", in the second quarter equity of the Bank of Moscow was 54.4 billion rubles . As a result, Bank of Moscow's Eurobond allowed a technical default, which is not outgrown in a month in real only because the Bank published a report in the last day of the allotted time.
Bankers felt the requirement of the Central Bank to disclose information in the accounts of the covenant unnecessary. "This is not the world practice, and covenants on Eurobond as disclosed in the prospectus to be released, in most cases the standard conditions, so I see no need to include them in the annual report, especially since it clearly does not fit into this document - says financial Director Alexander Morozov Savings .- With regard to syndicated loans, it is bilateral deals covenants on them are not public and should be known to the parties of the transaction, why should they publish, it is not clear at all. " According to him, the initiative will only add to the bankers work in preparing the annual report, but will not make the market more transparent. "I do not think that the public disclosure by banks on debt covenants is an urgent need - agrees deputy president of the Eugene Transcapitalbank Ivanovo .- The investors involved in the transaction, and so knowledgeable, and knowledge of individuals in terms of commitments will have little effect." The problem may be that the covenants on eurobonds are formulated in accordance with English law and market practice and a number of terms there is no adequate Russian counterparts (prospectuses for Eurobond issues are published in English), adds a credit analyst, "Renaissance Capital" Michael Nikitin.
As regards the situation with the Bank of Moscow, the publication of the covenants in its report for 2010 is unlikely to improve understanding of its financial condition uninformed customers, when published report, to correctly assess the financial position of the bank could not even experts, chief strategist at IG indicates BCS Maxim Shein.
Pros in the initiative of the Central Bank found a professional stock market participants. According to portfolio manager of the company "Discovery Capital" Eugene Vorobiev, disclosure of the covenant would be useful to qualified investors. "This would allow them to predict the prospects of the bank, having better information about possible payment on the basis of covenants when making decisions to invest in its securities," - he said. For this to work, said Mr. Vorobyev, you need to publish data on covenants more often than once a year - for example, in the form of material facts.
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