UPDATE 1-Moody's puts Russia's Otkritie Bank on review for possible downgrade

(Adds comment from bank in paragraphs 6 and 7)

MOSCOW, Aug 17 (Reuters) - Moody’s has placed Russia’s top private lender, Otkritie Bank, on review for a possible rating downgrade, the ratings agency said on Thursday.

A potential downgrade of a major bank is a sensitive issue for Russia’s banking system, battered by the central bank’s purge of lenders and its campaign of licence withdrawal.

Moody’s, which ranks Otkritie’s headline foreign and local currency rating as Ba3, said it was concerned about recently elevated volatility in the bank’s deposits, which negatively affected its funding costs.

Bank Otkritie increasing financing of assets owned by its controlling shareholder Otkritie Holdings also raised concerns, Moody’s said.

“A negative rating action could occur if the bank’s liquidity is dramatically damaged as a result of deposits outflow, or if Moody’s concludes that the bank’s recent financing of large related-party projects exposes the bank to high solvency risk,” Moody’s said in a statement.

Otkritie said in response that the stability of its operations was confirmed by the fact that Moody’s has for now left its long-term deposit ratings unchanged.

“The agency points at adequate levels of liquidity as well as at a possible support from the Bank of Russia for Otkritie as a systemically-important credit organisation,” Otkritie said.

Otkritie Bank is 65 percent owned by Otkritie Holding, which in turn is owned by a group of executives from Lukoil, VTB bank, Otkritie and others.

Sources close to the bank told Reuters this month that Otkritie was in talks with a number of potential investors as it was seeking ways to boost its capital.

Last month, Russia’s rating agency AKRA, a new Kremlin-backed ratings agency promoted by the central bank, gave Otkritie a BBB- rating, preventing it from raising some funds.

For the full text of the Moody's report please click the following link: bit.ly/2v57Ewr (Reporting by Andrey Ostroukh and Kira Zavyalova; editing by Susan Thomas, Greg Mahlich)