Banking licence of UM-Bank revoked and provisional administration appointed
By its Order No. OD-2953, dated 14 November 2018, the Bank of Russia revoked the banking licence of the Moscow-based credit institution UM-Bank Limited Liability Company, or UM-Bank LLC (Registration No. 1441) from 14 November 2018. According to its financial statements, as of 1 November 2018, the credit institution ranked 293rd by assets in the Russian banking system.
Funds attracted from households accounted for more than half of liabilities on the bank’s balance sheet; the credit institution invested them in low-quality assets — dubious and bad debts accounted for about 70% of the loan portfolio. As the credit institution consistently underestimated credit risk assumed, the Bank of Russia repeatedly requested that it create additional loss provisions. Besides, in order to conceal the bank’s real financial position and to formally comply with prudential requirements, UM-Bank LLC has performed opaque transactions during the current year to artificially maintain the equity capital.
The Bank of Russia repeatedly (5 times over the last 12 months) applied supervisory measures against UM-Bank LLC, including two impositions of restrictions on household deposit taking. At the same time, the credit institution violated asset sale restrictions imposed by the Bank of Russia to protect the interests of its creditors and depositors.
The operations of UM-Bank showed signs of misconduct by the management who conducted transactions aimed at withdrawal of liquid assets to the detriment of creditors’ and depositors’ interests. The Bank of Russia will submit information about the bank’s transactions bearing signs of a criminal offence to law enforcement agencies.
Under these circumstances, the Bank of Russia took the decision to revoke the banking licence of UM-Bank LLC.
The Bank of Russia takes this 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, due to repeated application within a year of measures envisaged by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’.
Following the banking licence revocation, professional securities market participant licence of UM-BANK LLC was cancelled.
By its Order No. OD-2954, dated 14 November 2018, the Bank of Russia appointed a provisional administration to UM-Bank LLC 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.
UM-Bank LLC is a member of the deposit insurance system. The revocation of a banking licence is an insured event as stipulated by Federal Law ‘On the Insurance of Household Deposits with Russian Banks’ in respect of the bank’s retail deposit obligations, as defined by law. The said Federal Law provides for the payment of indemnities to the bank’s depositors, including individual entrepreneurs, in the amount of 100% of the balance of funds but no more than a total of 1.4 million rubles per depositor.
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