UPDATE 5: Central bank says revokes license from Russia’s 42nd largest bank

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MOSCOW/KAZAN, Mar 3 (PRIME) -- The central bank has revoked banking licenses held by Tatarstan-based Tatfondbank, Russia’s 42nd largest by assets, from March 3, the regulator said in a statement on Friday.

The central bank revoked licenses from Intechbank and Bank Ankor, ranking 130th and 227th by assets, respectively and also located in Tatarstan. Both banks and Tatfondbank, with assets of 221 billion rubles, are members of the deposit insurance system, which means that each depositor may receive up to 1.4 million rubles in compensation.

The three banks did not comply with laws on regulation of banking activity and the central bank’s regulations and conducted highly risky lending policies, the central bank said.

Russian presidential spokesman Dmitry Peskov said the central bank takes into account every aspect of financial and banking stability while making a decision, which cannot be doubted. He added that the republic of Tatarstan is “traditionally a region with positive development dynamics, a trend setter in many areas… including innovations, bureaucracy efficiency, open-mindedness, which is highly evaluated.”

Vladlen Kuznetsov, an analyst at rating agency Moody’s said that the license withdrawal may shatter Tatarstan’s banking sector due to a partial loss of customer confidence.

“The situation with Tatfondbank and the final license revocation will hurt stability of the region’s banking industry. It will substantially decrease customer confidence in the republic’s banks, because Tatfondbank was 40% owned by the local government,” he said, adding that questions regarding government’s endorsement of state-run AK BARS Bank arise.

“AK BARS Bank is an officially authorized bank of the republic with a larger state interest than Tatfondbank. The current situation may result in further depositor volatility and revision of interbank lending limits for Tatarstan-based banks,” Kuznetsov said.

Tatarstan’s biggest AK Bars Bank is working as usual with liquidity and capital exceeding minimal requirements many times, it said in a statement.

“AK Bars Bank is performing operations under regular conditions, carrying out its obligations to clients and partners in full and on time. The ATMs have a sufficient level of cash. We conduct open information policies, disclosing data in open sources -- on our Web site and in social networks -- and giving well-timed feedback to our customers,” the bank said.

An analyst at global rating agency Fitch Alexander Danilov said AK Bars Bank could potentially resist withdrawal of 20% of its deposits, if the bank’s clients are wary about the situation in the banking system of Tatarstan.

Garegin Tosunyan, president of the Association of Russian Banks, said the licenses termination may lead to very serious consequences for the regional banking system.

“I regret license revocation from Tatfondbank, a credit organization with a solid track record. I believe the event will hurt not only this region,” the association quoted Tosunyan as saying.

Tosunyan added that problems of Intechbank and Bank Ankor were to a certain extent the result of Tatfondbank’s problems. “The famous ‘domino effect’ has come into action here, we warned about it some time ago. The bank, the local authorities and the regulator should have found a common ground to prevent this from happening,” he said.

At the same time, Tosunyan said the situation should not be exaggerated. “I hope this move will not lead to a wave of problems in other banks of the region,” he said, adding that such problems may be settled at early stages, “before the boiling point is reached.”

Anatoly Aksakov, head of the economy policy, innovation development and entrepreneurship committee at the State Duma and president of the Association of Regional Banks called the situation “sad,” because bailout of the banks proved impossible due to ineffective management. But he is sure the event will not have a bad influence on the market.

“This is a sad story for Tatarstan, as the region used to be an economic development role model for Russia. I have hoped for a bailout for Tatfondbank, because it is a major bank and its capital is largely owned by the government of the region. However, managements seemed to act so ineffectively that a bailout turned out to be impossible,” he said.

He expert is sure the central bank was forced to initiate the move due to the bank’s illegal actions, not only a wrong business model. “The recent arrests of Tatfondbank managers prove this,” he said.

Andrei Piskunov, the director of the sovereign and regional rating department at Analytical Credit Rating Agency (ACRA), said the banking system of the republic will not be hurt by the revocations.

“The financial stability of the region will not suffer as the banks did not perform transactions connected with the republic’s budget. The bulk of operations there are conducted via AK BARS Bank,” he said, adding that AK BARS Bank is likely to occupy the free market share.

The central bank also cancelled a license of Moscow-based bank Interregional Post Bank, Russia’s 475th largest, following a voluntary liquidation decision by its owners and on their request, the authority said. The bank is also a member of the deposit insurance system.

Payments to depositors of Bank Ankor and Interregional Post Bank will start no later than on March 17, the Deposit Insurance Agency (DIA) said.

Oleg Vyugin, the former Deputy Finance Minister and a member of the board of B&N Bank said that the collapse of the banks will not affect stability of the Russian banking system.

Oil company Tatneft, which holds a 5.4 billion ruble deposit at Tatfondbank, will claim its money in accordance with the current bankruptcy legislation, a company spokesperson told PRIME. The company said in December its financial state would remain stable even if the money cannot be recovered.

A spokesperson with Russia’s Agricultural Ministry told PRIME that no problems have appeared with banking servicing of Tatarstan’s agricultural industry, including budget funds transferring.

(58.4067 rubles – U.S. $1)

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