December 19, 2017 / 12:24 PM / in a year

Russia's VEB to transfer Globex to the state as it tackles Sochi Olympics legacy - sources

MOSCOW (Reuters) - Russian state development bank VEB, which is still grappling with the financial fallout from the 2014 Sochi Olympics, plans to transfer its Globex bank to the state after failing to find a buyer, three sources close to talks said.

FILE PHOTO - The logo of Russian state development bank Vnesheconombank (VEB) is pictured at the company's stand during the St. Petersburg International Economic Forum 2016 (SPIEF 2016) in St. Petersburg, Russia, June 16, 2016. REUTERS/Sergei Karpukhin

VEB has been supported by the state since 2016 as it struggles to restructure soured loans made for the $50-billion Winter Olympic Games held in the Russian Black Sea resort of Sochi.

VEB, headed by former Sberbank (SBER.MM) executive Sergey Gorkov since early last year, had been trying to sell Globex and another business, Sviazbank, to improve its finances.

But those attempts failed.

Two sources close to VEB and Globex, as well as a federal government source, told Reuters the bank was preparing instead to transfer Globex to the state federal property agency.

All three asked not to be named because of the sensitivity of the matter. One said the transfer process could start this year.

VEB and the state federal property agency did not reply to Reuters’ requests for comment.

Globex had 116.6 billion roubles ($2 billion) of assets at the end of the third quarter.

Globex, Russia’s No. 54 bank by assets according to Interfax data, and Sviazbank were moved to VEB from private owners under a state-agreed bailout after the 2008 global financial crisis.

The government spent 212 billion roubles on Globex and Sviazbank in that bailout.

VEB was the main lender to the Sochi games and has also been involved in other politically-important projects, including in eastern Ukraine.

Some of the Sochi loans had to be restructured as returns on investment missed original forecasts, while the eastern Ukraine has been ravaged by a separatist conflict.

VEB’s financial rehabilitation plan, agreed late in 2015, included the sale of Globex and Sviazbank to reduce the burden on the bank.

The transfer decision comes as Russia gets to grips with wider problems in its financial system. The central bank has bailed out three banks in recent months although there is no connection to VEB’s move.

In September, the finance ministry said it would cut support to VEB by a third to 100 billion roubles a year for the next three years.

Reporting by Tatiana Voronova and Darya Korsunskaya; Additional reporting by Katya Golubkova; Editing by John O'Donnell and Mark Potter

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