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Central Bank revokes licenses from three banks

March 26, 2014, 11:03 UTC+3
As of March 26, the sanctions come into effect against Sberinvestbank, My Bank — Ipoteka and Sovincom. Non-banking crediting organization EnergoBusiness has also been stripped from license
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Sovincom bank

Sovincom bank

© ITAR-TASS/Vyacheslav Prokofyev

MOSCOW, March 26. /ITAR-TASS/. Russia’s Central Bank has revoked licenses from three banks.

“According to order #OD-406 of the Bank of Russia dated March 26, 2014, the license for banking transactions has been revoked from crediting organization Sberinvestbank, CJSC (registration #1743, Yekaterinburg) as of March 26, 2014,” the regulator’s message says.

This measure has been applied due to “crediting organization’s non-compliance with federal legislation regulating banking activity, as well as with standard act of the Bank of Russia”. A similar measure has been applied to My Bank — Ipoteka and Sovincom commercial bank.

According to the Central Bank of Russia, Sovincom commercial bank did not accumulate reserves adequate to risks of possible credit losses, and did not fulfill the requirements of the watchdog’s instructions. In addition, the crediting organization was involved in ambiguous transactions, the watchdog noted in its statement. In 2013, the volume of clients’ transactions with signs of ambiguous operations exceeded 6.8 billion rubles ($191.3 million).

Non-banking crediting organization EnergoBusiness was also stripped from license.

The Bank of Russia said EnergoBusiness violated the procedure of keeping accounting records, did not provide proper internal controls, “committed violations of Central Bank orders on countering legalization of criminally received incomes and funding terrorism”.

In terms of assets volume, the crediting organization ranked 875th in Russia’s banking system as of March 1, 2014.

The main reason for large-scale and detailed inspections of Russian banking system is to fight suspicious financial transactions, CBR Chair Elvira Nabiullina said earlier.

Around 900 banks operate in Russia. The CBR received a legislative instrument to expand its supervision last summer. Since then 17 financial inspections were conducted that resulted in 24 banks banned to carry out financial and crediting operations. The bulk of licence sanctions were imposed on 11 Moscow-based banks and seven banks registered in Russian North Caucasian Republic of Dagestan. Five banks from central Russia and one bank from North Caucasian Republic of North Ossetia were sanctioned either. CBR’s bank sanation was resounding in society and the central bank admitted this, noting that tougher control allows curbing suspicious transactions of some bank clients.

The country’s Ministry of Economic Development has also noticed the scale of nervous responses from people to revocation of licences from banks that offered high interest rates on deposits. “In fact, response of society is hardly predictable sometimes. Certainly, this should be taken into account. I hope that my colleagues also bore this in mind,” Minister of Economic Development Aleksey Ulyukaev commented on current situation. He said with confidence that the CBR had taken the decisions thought out beforehand.

The point is that purge in banking sector should influence positively operation of Russian banking system in general thanks to qualitative growth of management standards and getting rid of unviable banks. It was already noted that revocation of licences stirred up transfer of monetary funds from small to larger and reliable Russian banks. International rating agency Fitch that surveyed 100 major Russian banks with 82 percent aggregate share of deposit accumulation has fixed massive movement of deposits to such leading financial organisations as Russian pubic savings bank Sberbank, Vnesheconombank (VTB) and Gazprombank.

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