Preferred shares issued to increase banks' capitalisation will constitute part of their core capital | Practical Law

Preferred shares issued to increase banks' capitalisation will constitute part of their core capital | Practical Law

This article is part of the PLC Global Finance January 2010 e-mail update for the Russian Federation.

Preferred shares issued to increase banks' capitalisation will constitute part of their core capital

by White & Case LLP
Published on 26 Jan 2010 • Russian Federation
This article is part of the PLC Global Finance January 2010 e-mail update for the Russian Federation.
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The Central Bank has amended Regulation No. 215-P "On the Method of Calculation of the Net Worth (Capital) of Credit Organisations," so that, where a bank has increased its capital by exchanging preferred shares for federal loan bonds, such preferred shares make up part of the bank's core capital.
On 11 November 2009 the Central Bank issued Directive No. 2329-U amending Central Bank Regulation No. 215-P "On the Method of Calculation of the Net Worth (Capital) of Credit Organisations," dated 10 February 2003. The Directive entered into force on 16 December 2009.
Under Regulation No. 215-P, a credit organisation's net worth (capital) consists of the core capital and additional capital (Tier 1 and Tier 2 capital, respectively).
The Directive follows Federal Law No. 181-FZ, dated 18 July 2009, which provides for the possibility of increasing banks' capitalisation by way of exchange of banks' preferred shares for federal loan bonds. The Directive provides that preferred shares issued under this Law make up part of the bank's core capital.