December 19, 2017 / 3:12 PM / a year ago

UPDATE 1-Russia central bank wants banks only to sell subordinated debt to professionals

* advises banks against selling sub-debt to households

* says sub-debt could be replaced with preferred shares

* Issue of sub-debt write-offs arose as rescues banks (Adds details, quotes, background)

By Elena Fabrichnaya

MOSCOW, Dec 19 (Reuters) - Russian banks should consider only selling their subordinated bonds to professional investors and not to retail buyers, a senior Russian central banker said on Tuesday.

The issue of subordinated debt — unsecured and last in the queue to be repaid in the event of bankruptcy — became acute earlier this year when the Russian central bank launched a series of bailouts of troubled banks.

The central bank has rescued three private lenders - Otkritie, B&N and Promsvyazbank - over the last couple of months and, under the bailout procedures, some of the subordinated debt has been written off.

“We are not much in favour of selling subordinated bonds to retail investors... Often it is impossible for the general public to assess risks of the sub-debt,” Central Bank First Deputy Governor Sergei Shvetsov said.

He also told a conference on Tuesday that the central bank was telling banks to gradually switch to preferred shares with non-voting rights from subordinated debt. Preferred shares can also be used to boost banks’ capital.

Dmitry Ananyev, who co-owns Promsvyazbank along with his brother, said in his last interview with Reuters before the bailout that the market of the subordinated debt had in fact died, limiting a number of tools that banks can use to beef up their capital.

“Sub-debt holders become quasi-owners, all the risks are transferred to them. This instrument became unpopular... Banking sector papers - even the senior debt - becomes unpopular,” he said in November. (Reporting by Elena Fabrichnaya; Writing by Andrey Ostroukh and Katya Golubkova; editing by Jeremy Gaunt)

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