Banking licence of Agrosoyuz Bank revoked and provisional administration appointed
By Order No. OD-2900, dated 07.11.2018, the Bank of Russia revoked the banking licence of the Moscow-based credit institution limited liability company Commercial Bank Agrosoyuz or LLC CB Agrosoyuz (Registration No. 1459) from 7 November 2018.
Household funds were the main source of funding of asset-side operations by LLC CB Agrosoyuz (over 70% of liabilities). Risk appetite of the bank caused a large amount of impaired assets to accumulate on its balance sheet. In the course of this year the supervisor repeatedly revealed underestimation of credit risk by the bank and required LLC CB Agrosoyuz to make additional loan loss provisions. However, the credit institution conducted ‘scheme’ operations, involving its owners, intended to artificially sustain the equity capital to create the appearance of formal compliance with prudential regulations. In particular, to avoid grounds for regulatory measures to prevent bankruptcy of the credit institution its sole member provided it financial assistance nine times in 2018 for a total amount of 750 million rubles. Every time funds were deposited with the bank by a third party by proxy from the bank’s member. The sources of the funds to provide financial assistance were opaque for the supervisor.
In the course of the current inspection the Bank of Russia established the fact that the tills of LLC CB Agrosoyuz lacked a large amount of cash exceeding 1.3 billion rubles, which is comparable with the bank’s equity capital. Meanwhile, the bank submitted to the supervisor false documents to conceal its real financial standing and obstructed the Bank of Russia’s inspection.
Moreover, LLC CB Agrosoyuz violated the requirements of law and Bank of Russia regulations on anti-money laundering and combatting the financing of terrorism in respect of the completeness and reliability of information submitted to the authorised body.
The Bank of Russia repeatedly (9 times over the last 12 months) applied supervisory measures against LLC CB Agrosoyuz, including two restrictions and one ban on household deposit taking.
The credit institution’s operations showed signs of misconduct by the management who tried to withdraw liquid assets to the detriment of creditors’ and depositors’ interests. The Bank of Russia will submit to law enforcement agencies information about the transactions conducted by the bank bearing signs of a criminal offence.
Under the circumstances the Bank of Russia took the decision to withdraw LLC CB Agrosoyuz from the banking services market.
The Bank of Russia took such an extreme measure — revocation of the banking licence — because of the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, repeated violations within a year of requirements stipulated by Articles 6 and 7 (excluding Clause 3 of Article 7) of the Federal Law ‘On Countering the Legalisation (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism’ as well as Bank of Russia regulations issued in accordance with the said law, and the repeated application within a year of the measures stipulated by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’, taking into account a real threat to the interests of creditors and depositors.
Following banking licence revocation, LLC CB Agrosoyuz’s professional securities market participant licence was also cancelled.
By its Order No. OD-2901, dated 07.11.2018, the Bank of Russia appointed a provisional administration to LLC CB Agrosoyuz for the period until the appointment of a receiver pursuant to the Federal Law ‘On Insolvency (Bankruptcy)’ or a liquidator under Article 23.1 of the Federal Law ‘On Banks and Banking Activities’. In accordance with federal laws, the powers of the credit institution’s executive bodies were suspended.
LLC CB Agrosoyuz is a member of the deposit insurance system. The revocation of the banking licence is an insured event as stipulated by Federal Law No.
According to the financial statements, as of 1 October 2018, the credit institution ranked 198th by assets in the Russian banking system.
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