UPDATE 2-Russian tycoon's bank defaults on Eurobond

* IIB defaults on 200 million euro Eurobond due 2010

* Asks to extend maturity of the note

* Russian stocks, bonds unmoved, no sell-off expected

* Russian banking system seen immune

(Adds analyst comments, details)

By Dmitry Sergeyev and Oksana Kobzeva

MOSCOW, July 7 (Reuters) - The bank of a well-connected Russian tycoon and member of parliament, Sergei Pugachev, defaulted on a Eurobond on Tuesday in the country's first private bank default on an external bond in a more than decade.

Although there has not been a default on an external debt issue since Russia's 1998 financial crisis, International Industrial Bank's (IIB) announcement did not trigger a broad market reaction.

Analysts said it may signal the end of state bailouts to every troubled bank as the government grows more confident about the banking system.

Pugachev, who represents Siberia's Tuva Republic in parliament's upper house, has long been seen as close to Prime Minister Vladimir Putin. However, banking industry insiders have said the latest troubles of his International Industrial Bank (IIB) may signal the tycoon has fallen out of favour with the authorities.

"We view IIB situation as an isolated story not indicative of systemic risks as the bank has a unique profile," said Mikhail Galkin at VTB Capital.

Russian banks borrowed aggressively during the economy boom years earlier this decade and the cash-rich government had to bailout some major players at the peak of the crisis to prevent bad debt problems crippling the whole banking system.

Economists have praised Russia for anti-crisis measures, which helped avoid a run on banks, but ratings agencies still say lenders may need to commit billions of dollars to provisions against bad debts despite signs of economic recovery. [ID:nLDE657290]

Some Russian banks defaulted on rouble bonds during the latest crisis but IIB is the first bank to default on an external debt issue since Russia's previous financial crisis in 1998.

International rating agencies cut IIB's ratings last month, citing its weak liquidity position caused by its obligation to meet large debt repayments due in the mid-term.

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NO SELL-OFF, BROAD IMPACT

The bank, also known as Mezhprombank, defaulted on a 200 million euro Eurobond due in 2010. IIB also has a 200 million euro Eurobond issue due 2013 <0#RU048592716=>, which on Tuesday traded at 64.5 percent of nominal value at bid price.

Russia's sovereign benchmark 2030 Eurobond was little changed. <0#RU011428878=>.

"I don't think there will be a (broad) sell-off," said Alexander Dotkin, bond trader at bank Zenit. "The situation has been under discussion for the last three weeks ... Investors have been cautious regarding the bank's risks for a long time".

IIB, ranked among Russia's top 30 banks, has been a top recipient of non-collateralised loans from the central bank, a bailout measure introduced in the early days of the crisis.

The central bank stopped rolling over the debt and began restructuring discussions with IIB in June.

"Given the unprecedented support for the banking system by the central bank, it was inevitable that the plug would be pulled on at least one of them. For the time being, spillover towards other medium sized banks does not seem likely," said Richard Segal, analyst at London-based Knight Capital.

The Russian market was up 1.9 percent at 1048 GMT tracking weaker global stocks and oil prices.

Pugachev has already agreed to sell some of his assets as part of a deal restructuring 32 billion roubles in debt of IIB to the central bank.

The bank has been seeking $600 million in loans from state-run VTB bank while Pugachev hopes to close the deal on selling his shipbuilding assets by the end of July. ($1=31.10 Rouble) (Additional reporting by Zlata Garasyuta in Moscow and Carolyn Cohn in London; writing by Dmitry Zhdannikov; editing by Karen Foster)