There is an air of incredulity around Promsvyazbank’s request for proposals from banks to refinance the $300m equivalent one year loan it signed last year. Some even take the idea as a joke.
And that’s not because there’s anything wrong with the institution itself – loan bankers say it’s a strong bank with good relationships that cares about ancillary business for lenders.
Nor has Promsvyazbank been officially sanctioned by either the US or EU, although there are no guarantees this will remain the case.
Having missed two rounds of EU sanctions, Promsvyazbank will no doubt be hoping to convince banks that its admission to the club is unlikely. After all, getting coordination between fractious European foreign ministries on previous sanctions rounds was hard enough and there is little stomach in some quarters to push Russia further.
And a simple $300m refinancing is hardly likely to make any material dent in the bank’s business, let alone to an economic challenge of the magnitude that Russia faces with its debt load. Promsvyazbank can argue that this is a wholly different proposition to the systemic financing block placed on, say, state-owned Rosneft.
And even a month or two ago, that argument would have probably held weight with western banks. But Promsvyazbank could well suffer for its own recent lending success — the bank has made various loans, no doubt at good rates, precisely to Russian companies that are unable to access Western markets. Rosneft is among them.
That makes Promsvyzabank a winner on lending fees, but exposes an apparent loophole in the rules.
Grey areas abound under the EU and US sanctions regime, but the spirit of the rulings must extend to use of proceeds. Lending a Russian bank money which it might on-lend to sanctioned entities is uncomfortably close to the line, and the very act of asking for a loan risks toughening up guidance from authorities or compliance departments that sanctions-busting at one remove is not acceptable.
Finding six European banks willing to risk big fines to take a $50m stake — even in replacing old money — is going to take some persuasion.