OREANDA-NEWS. May 20, 2009. The Bank of Russia is prepared to enlarge the list of sources for tier 1 capital (equity capital) of lending institutions with a new type of subordinated instruments (a subordinated loan with additional terms, specifically, for a term of at least 30 years), CBR reported in its draft instructions “On Making Amendments to Statute #215-P dated February 10, 2003 of the Bank of Russia “On the Methodology of Determining Own Funds (Equity) of Lending Institutions”.

In addition, as an explanatory note to the document pointed out, at issue could be a subordinated loan, a deposit and a bonded loan. “This subordinated instrument with a term of at least 30 years suggests it will be possible not to indemnify or accumulate interest (coupon) income and cover losses by terminating in full or in part obligations of a borrowing lending institution under a subordinated loan agreement with additional terms if reasons arise for the lending institution to take measures to prevent bankruptcy.

In addition, a lending institution could be provided with the opportunity to prematurely repay such subordinated loan no earlier than 10 years upon its receipt,” the monetary authority noted. Currently, subordinated loans with a 5-year maturity are incorporated into tier 2 capital (own funds).