World

Russian government hands out biggest bank bailout in nation’s history

Alec Jacobs Contributor

America isn’t the only country whose government gives banks massive bailouts.

Russia has given the Bank of Moscow $14 billion, the largest bailout in the nation’s history, the BBC reports. The rescue came after another Russian bank, VTB, gained control of the Bank of Moscow and discovered that nearly a third of the bank’s assets were in bad loans.

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A warrant has been issued for the former head of the Bank of Moscow, Andrei Borodin, who has since fled the country.

Borodin issued a statement from London, saying he was shocked at the bailout’s size and that the takeover by VTB was politically motivated.

VTB, meanwhile, accused the Bank of Moscow and Borodin of fraudulent lending. In response, the Russian Finance Minister, Alexei Kudrin, has called for a criminal investigation.

Kudrin accused Borodin, a friend of ousted Moscow mayor Yury Luzhkov, of mismanagement.

The Russian government has also stepped in to save VTB in the past with a $6.4 billion low-interest loan given during the financial crisis.

According to the Financial Times, the huge bailout is raising concerns about the Russian central bank’s oversight capabilities. “This was not even a second tier bank,” said Tim Ash, an economist at the Royal Bank of Scotland. “It was a quasi-sovereign institution at the heart of the state … If this kind of thing happens at such an important institution, it’s an amber light that the entire Russian banking system has to be finally cleaned up.”