Russian Bank Resolution

Legal Framework

Bank resolution in Russia is governed by the Federal Law on the Insolvency (Bankruptcy) of Credit Institutions (No. 395-1 of 25 February 1999) and the Federal Law on Banks and Banking Activities (No. 395-1 of 2 December 1990), as amended following the 2013–2018 banking reform. The Central Bank of Russia (CBR) is the primary resolution authority, exercising powers to intervene in distressed banks, impose corrective measures, and manage the resolution process. The CBR’s resolution powers are complemented by the Federal Law on the Deposit Insurance System (No. 177-FZ of 23 December 2003), which provides depositor protection.

The resolution framework distinguishes between pre-insolvency measures (early intervention), administrative resolution (temporary administration), and formal insolvency (liquidation). The objective of resolution is to: protect depositors and creditors; maintain financial stability; preserve the continuity of essential banking services; and minimise the cost of resolution to the public finances.

CBR Resolution Powers

The CBR exercises extensive resolution powers under Chapter 32 of the Federal Law on the Insolvency of Credit Institutions. The CBR may: impose restrictions on the bank’s operations; require the bank to increase its capital; replace the bank’s management; appoint a temporary administration; impose a moratorium on creditor claims; transfer assets and liabilities to a bridge bank; and, as a last resort, revoke the banking licence and initiate liquidation.

The CBR’s early intervention powers include the authority to require the bank to: submit a recovery plan; reduce its risk exposure; increase provisions for loan losses; restrict lending and investment activities; and replace directors or senior managers. These powers are exercisable where the bank fails to meet prudential standards or where the CBR identifies a deterioration in the bank’s financial condition.

Banking Sector Consolidation Fund

The Banking Sector Consolidation Fund (FCBS) was established in 2017 as the primary resolution mechanism for systemically important banks. The FCBS, managed by the CBR, replaced the earlier system in which the Deposit Insurance Agency (ASV) was the primary resolution authority. The fund is capitalised through federal budget allocations and CBR contributions, with an initial capitalisation of approximately RUB 1 trillion.

The FCBS resolution mechanism involves the CBR taking control of the distressed bank through the acquisition of its shares, the appointment of a new management team, and the implementation of a rehabilitation plan. The bank continues operations under CBR management for a period of up to five years, after which the CBR sells its stake in the bank to private investors. The FCBS mechanism has been used for the resolution of several systemically important banks, including Otkritie FC Bank, B&N Bank, and Promsvyazbank.

The FCBS resolution model differs from the traditional approach in several respects: the CBR provides capital directly rather than through a state-owned entity; the resolution is carried out without suspending the bank’s operations; and the period of CBR ownership permits a gradual rather than an urgent sale process. The model was influenced by the US Dodd-Frank Act resolution framework and the EU Bank Recovery and Resolution Directive.

Temporary Administration

The temporary administration (vremennaya administratsiya) is a statutory resolution mechanism under Article 23 of the Law on the Insolvency of Credit Institutions. The CBR appoints a temporary administration to manage a bank where: the bank violates regulatory requirements; the bank’s financial condition deteriorates significantly; the bank fails to meet its obligations in a timely manner; or the bank engages in transactions that threaten the interests of creditors.

The temporary administration has broad powers: it may suspend the powers of the bank’s governing bodies; manage the bank’s current operations; take measures to restore the bank’s financial condition; and apply to the CBR for the revocation of the licence. The temporary administration must complete its mandate within six months, extendable to 18 months. During the temporary administration period, the bank continues operations under state management, protecting depositors and creditors from immediate loss.

Bail-in

Russian law provides for bail-in (preobrazovanie dolga v kapital) as a resolution tool under Article 25 of the Law on the Insolvency of Credit Institutions. The bail-in mechanism permits the conversion of certain creditor claims into equity of the distressed bank, reducing the bank’s debt burden and recapitalising it without the injection of public funds. The bail-in tool was introduced as part of the 2017 banking reform, aligning Russian resolution practice with international standards under the Financial Stability Board’s Key Attributes of Effective Resolution Regimes.

The bail-in may be applied to: subordinated debt; interbank deposits exceeding the deposit insurance limit; and other unsecured claims, excluding insured deposits and secured claims. The bail-in decision is made by the CBR in consultation with the bank’s management. The conversion rate is determined by an independent valuation of the bank’s assets and liabilities. The bail-in tool has been used in several bank resolutions, reducing the burden on the deposit insurance fund and imposing losses on creditors as intended by the resolution regime.

Bridge Bank

The bridge bank (perekhodny bank) is a resolution tool that permits the transfer of the distressed bank’s healthy assets and deposits to a newly established bank, leaving the distressed entity to be liquidated. Under Article 25.1 of the Law on the Insolvency of Credit Institutions, the CBR may establish a bridge bank and transfer to it: insured deposits; performing loans; liquid assets; and essential contracts and licences.

The bridge bank continues the operations of the distressed bank, ensuring continuity of service for depositors and borrowers. The distressed entity retains non-performing assets, uninsured liabilities, and equity claims, which are resolved through liquidation proceedings. The bridge bank mechanism was used in the resolution of several regional banks, enabling the preservation of banking services in affected regions while containing the cost of resolution.

Deposit Insurance — ASV

The Deposit Insurance Agency (Agentstvo po Strakhovaniyu Vkladov, ASV) operates the mandatory deposit insurance system under Federal Law No. 177-FZ. All banks licensed to accept deposits from individuals are required to participate in the insurance system. The insurance premium is paid by banks as a percentage of their deposits, with rates differentiated by risk profile.

The deposit insurance limit is 1,400,000 RUB per depositor per bank (as of 2026), covering approximately 95% of individual depositors. The ASV is responsible for: managing the deposit insurance fund; paying compensation to depositors when a bank’s licence is revoked; and acting as a liquidator of insolvent banks. Since 2017, the ASV’s resolution role has been partially supplanted by the FCBS for systemically important banks, but the ASV continues to administer deposit insurance and liquidate smaller banks.

Liquidation Proceedings

Where a bank cannot be resolved through the FCBS, temporary administration, or bridge bank mechanisms, the CBR revokes its licence, triggering liquidation proceedings. The ASV is appointed as the liquidator for banks that participated in the deposit insurance system; for other credit institutions, the liquidator is appointed by the court.

Liquidation proceedings follow the general framework of the Federal Law on Insolvency (No. 127-FZ of 26 October 2002), with modifications for credit institutions. Creditors’ claims are satisfied in the following order: first, claims of individuals on insured deposits (paid by the ASV); second, claims of the ASV by subrogation; third, claims of the CBR; fourth, claims of other creditors; and fifth, subordinated claims and equity holders. The liquidation process must be completed within two years, extendable by court order.