Press Service

The Central Bank of the Russian Federation (Bank of Russia)

Press Service

12 Neglinnaya Street, Moscow, 107016 Russia;

On revocation of banking licence from Central-European Bank and appointment of provisional administration

By its Order No. OD-2214, dated 24 August 2018, the Bank of Russia revoked the banking licence of the Chita-based credit institution Commercial Bank Central-European Bank (Limited Liability Company), or Central-European Bank, Ltd. (Registration No. 2670) from 24 August 2018. According to financial statements, as of 1 August 2018, the credit institution ranked 322nd by assets in the Russian banking system; it was not a socially important lender, and its impact on aggregate indexes of the banking sector of the Transbaikal Territory was unsubstantial (the bank was registered in Moscow until September 2017).

The main activity in the business model of Central-European Bank, Ltd. was the issue of bank guarantees. As of 1 August 2018, the portfolio of guarantees issued by the credit institution totalled more than 6.5 billion rubles and exceeded its capital by a factor of nine. The bank’s formal approach to the assessment of principals’ activity ultimately resulted in a considerable increase in current year losses associated with delivery on obligations on the issued guarantees, including through legal action. Furthermore, the bank’s highly risky credit policy resulted in a considerable amount of low-quality assets on the bank’s balance sheet. The due diligence check of credit risk accepted by Central-European Bank, Ltd. established a substantial decline in the bank’s capital and entailed the need for action to prevent the credit institution’s insolvency (bankruptcy), which created a real threat to its creditors’ and depositors’ interests.

The Bank of Russia had repeatedly (four times over the last 12 months) applied supervisory measures against Central-European Bank, Ltd.

However, the management and owners of the credit institution failed to take effective measures to normalise its activities. Under these circumstances, the Bank of Russia took the decision to revoke the banking licence of Central-European Bank, Ltd.

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)’, considering a real threat to the creditors’ and depositors’ interests.

By its Order No. OD-2215, dated 24 August 2018, the Bank of Russia appointed a provisional administration to Central-European Bank, Ltd. 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.

Central-European Bank, Ltd. is a member of the deposit insurance system. The revocation of the banking licence is an insured event as stipulated by Federal Law No. 177-FZ ‘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.

24 August 2018

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