Draft law for Bank of Russia’s divestment from Sberbank’s equity

The Ministry of Finance of the Russian Federation and the Bank of Russia have drawn up a draft law stipulating the process for the Bank of Russia’s divestment from Sberbank’s equity. The document establishing the procedure and terms for selling Sberbank’s shares has been submitted to the Government of the Russian Federation.

According to the plan, the Bank of Russia’s equity stake will be acquired using the National Wealth Fund’s resources at market value. The NWF’s investment in Sberbank’s shares is in line with the NWF’s management goals — preservation of invested funds and stable returns on investment. By the end of 2019, the expected dividend yield on Sberbank’s shares will substantially exceed the cost of borrowings in the federal government bond market.

As long as the Bank of Russia combines the roles of a shareholder, the regulator and the supervisory agency, this creates a certain conflict of interest. The more complex and comprehensive the regulation and economic relations in finance become, the more challenging it is to manage this conflict of interest. When the Bank of Russia sells its equity stake in Sberbank, this will settle the issues regarding such conflict of interest and the regulator’s arm’s-length relationship with financial market players.

Sberbank is the largest financial institution in Russia, including by the amount of financial services to households; therefore, it is reasonable to maintain a significant public stake in its equity. Sberbank is also a major public joint-stock company, and for this reason it is important to preserve and develop a mature corporate governance system which is of great value in itself for Sberbank, its shareholders, clients and the state in general.

The Bank of Russia and the Ministry of Finance support the development priorities of Sberbank as a technologically advanced and client-focused institution striving to continuously enhance its efficiency and committed to the best corporate governance standards.

The upcoming deal involves unique terms. Due to this, the draft law stipulates specifics of the application of the Federal Law ‘On Joint-stock Companies’, requiring that the share repurchase offer be sent to Sberbank’s minority shareholders. According to the draft law, the Bank of Russia will make this offer to Sberbank’s minority shareholders on a one-time basis when it sells the first portion of its equity stake at a price equivalent to the sale price.

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