Central Bank of Russia allowed banks to include ruble-denominated subordinated bonds issued in exchange for foreign currency subordinated debt in capital

MOSCOW. April 28 (Interfax) - The Central Bank of Russia has allowed credit institutions to include ruble-denominated subordinated bonds issued as part of an exchange for foreign currency subordinated bonds in capital.

The corresponding decision of the Central Bank's board of directors dated April 24 was published by the regulator on Monday.

In order for banks to be able to place ruble subordinated bonds among holders of foreign currency subordinated bonds, permission has been given to include ruble subordinated bonds in capital, payment for which upon placement occurs in non-monetary form, namely foreign currency subordinated bonds, the CBR said in its review of banking regulation for Q1 2026 which the CBR published on Monday.

The maximum yield on ruble bonds should not exceed 15% or the level of the CBR's key rate plus 5 percentage points (for floating rate), which will ensure acceptable returns for investors. The measure applies to bonds owned by individuals who are non-qualified investors. This will give banks the opportunity to exchange securities owned by this category of holders, the Central Bank said.

The decision is valid until December 31, 2026 inclusive, and will subsequently be incorporated into regulation, the CBR said.

In December last year, the State Duma approved a bill allowing Russian issuers to place ruble-denominated bonds among holders of their bonds denominated in currencies of unfriendly countries until the end of 2026, thus exchanging the outstanding foreign currency bonds for them. It was signed into law by the Russian president that same month and entered into force with respect to bonds.

One issuer with a significant amount of foreign currency bonds outstanding for which replacement with ruble bonds is relevant is VTB . Earlier in April, VTB's supervisory board made a decision on placing bonds planned to be issued in exchange for foreign currency subordinated debt as part of a ruble conversion project. It is being implemented in accordance with the new law, which allows for the exchange of foreign currency bonds for ruble bonds if the holder wishes.

The exchange is envisaged in the form of payment for new bonds with foreign currency securities on a one-for-one basis, VTB said. The new subordinated bonds will be placed with a foreign currency face value, which on a certain day after placement will be converted into rubles at the CBR's exchange rate in accordance with the issuance documentation. This will eliminate the influence of currency volatility during the order collection period, the bank said. The exchange will be voluntary, at the discretion of the holders.

VTB plans to begin the exchange in the second half of May after registering the issuance documentation with the Central Bank.

It will be possible to exchange bonds from all seven outstanding foreign currency subordinated issues of VTB for the new bonds. The exchange will be made for bonds from three new issues.