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Moody's downgrades Russian bank Otkritie after bail-out

[MOSCOW] Credit rating agency Moody's said on Tuesday it had downgraded Otkritie Bank after Russia's central bank stepped in to bail out the struggling lender.

Otkritie said it was surprised by the move as the downgrade did not reflect its "increased level of reliability" since the central bank took control of its operations under the rescue package.

The agency first placed Otkritie on review for a possible rating downgrade last month, raising fears about its health. The central bank made its move last week after a sustained run on Otkritie's deposits.

Moody's said it has downgraded the long-term foreign and local-currency senior unsecured debt and deposit ratings of Otkritie to B2 from Ba3. "The Central Bank of Russia now has a number of policy tools at its disposal which range from the full support it has indicated, to a liquidation of the bank. Moody's believes that a liquidation is very unlikely in view of the bank's size," it said in a statement.

Given Otkritie's status as a "systematically important credit institution", Moody's also said it had revised the probability of government support for Otkritie's senior creditors to "very high from moderate". "Nevertheless, Moody's believes that Otkritie's failure and the central bank's due diligence will likely lead to significant losses and consequent reduction in capital," it said.