Three Russian banks stripped of their licenses at once

Investbank, the Project Financing Bank and the Smolensky Bank were stripped of their licenses, because these financial institutions had violated the CBR regulations and laws

MOSCOW, December 16. /ITAR-TASS World Service/. The Central Bank of Russia (CBR) has revoked the licenses from three Russian banks at once last Friday, December 13. Investbank, the Project Financing Bank and the Smolensky Bank were stripped of their licenses, because these financial institutions had violated the CBR regulations and the laws, particularly they had produced the false accounting reports.

Probably, these are not the last revocations of the licenses this year, Vedomosti daily reported. Before the end of the year three more banks may be stripped of their licenses, a source of the CBR top manager said. “Several more licenses will be revoked,” the source close to the CBR said, naming several affiliate banks of the banks that had already been deprived of their licenses.

“The regulator takes all the efforts to save the banks, but there have not already been other variants, as any delays in revocation of the licenses would have deteriorated the current situation,” the banker said with the reference to a CBR employee. First Deputy Chairman of the Central Bank of Russia Aleksey Simanovsky said in an interview with the TV channel Rossiya 24 that the revocation of the licenses was needed. Different variants of sanation were discussed regarding Investbank and the Smolensky Bank, but they turned out to be economically infeasible, he said.

“These three banks were systemically significant in contrast to the Master Bank,” Vedomosti daily quoted analyst of the BKF-bank Maxim Osadchiy as saying. “The separate revocation of the license from each of them would not have triggered the domino effect, but the cumulative effect from the simultaneous revocation of the licenses from three banks at once can cause a shock, which is quite strong to resume the chain reaction,” he said.

The Moscow International Currency Association (MICA), which brings together the professional participants of the inter-bank market, noted “with concerns and regret” that “the loss of liquidity” is one of the initial reasons for the difficulties that these banks faced, Vedomosti daily said in another article.

“This means that regulatory efforts in line with the action taken by the law enforcement agencies and indecent rivals begin to bring their results. The depositors and clients haste to transfer their assets from the private banks to the banks with the state capital,” the daily quoted the association as saying in its statement. The association warns that the trust to the banks is falling and “threatens to stir up a new wave of the banking crisis.” The association noted that the chain reaction will result in fatal problems for a large number of absolutely decent market entities, including the banks that are among the 50 top banks.

The sum of insurance benefits to the depositors of the three banks will exceed 50 billion rubles (about $1.5 billion) that will result in the deposit insurance fund to half against the beginning of the last autumn, when the regulator began to cleanse the banking market, RBC daily reported. Under Elvira Nabiullina, who heads the CBR since June 24, 25 banks were stripped of their licenses.

“Such bank is not the only one, but such banks are few,” Elvira Nabiullina said after the revocation of the license from the Master Bank on November 20. Stripping the bank of its license from the list of the top 100 Russian banks, the financial regulator put it clearly that even big assets on the accounts of people (about 47 billion rubles (about $1.4 billion) in the Master Bank) will not put up an obstacle to use the harshest measure. The last Friday confirmed once again the CBR plans to cleanse the banking market, the daily noted.

The revocation of the license from Master Bank was a catalyst, that first step, which also evoked a crisis of mistrust and the growth of interbank rates. “All market entities were prepared that their licenses will be revoked mainly due to the black lists of the banks, which were circulating on the market,” he noted.

“It is clear who had lost. But who has won?” Moskovsky Komsomolets daily contemplated. “It is also clear. The largest state banks, to which the CBR instructed to assume the processing ‘heroically’ and to receive up to three millions of new participants of financial transactions at once,” the daily noted.