Banking licence of Interprombank revoked
By its Order No. OD-691, dated 16 April 2021, the Bank of Russia revoked the banking licence of the Moscow-based credit institution Joint Stock Commercial Bank Interprombank, or JSC CB Interprombank (Registration No. 3266, hereinafter, Interprombank). The credit institution ranked 151st by assets in the Russian banking system.1
The Bank of Russia made this decision in accordance with Clause 6 of Part 1 of Article 20 of the Federal Law ‘On Banks and Banking Activities’,2 based on the facts that Interprombank:
- understated the amount of loan loss provisions to be set up and conducted transactions in non-core assets to artificially improve its financial indicators and conceal its actual financial standing;
- violated federal banking laws and Bank of Russia regulations, due to which the regulator repeatedly applied measures against it over the past 12 months including two cases of restrictions on household deposit-taking.3
Bad loans represented the major part of the loan portfolio of Interprombank. The decline in the quality of the loan portfolio and the bank’s involvement in a number of legal proceedings caused substantial financial losses, including due to the need to create significant loan loss provisions. Faced with the deterioration of its loan portfolio quality, Interprombank conducted ‘scheme’ transactions with non-core assets to disguise the actual gravity of risks and overstate the size of its capital.
Over the course of 2020, the bank’s liquid assets declined to the critical level amid a growing number of third parties’ (including credit institutions’) legal claims against the bank, which evidenced that the bank would not be able to comply with its obligations in the short term. The above-mentioned trends were accompanied by an outflow of client funds and a deterioration of the current liquidity ratio.
All of these risks and their growth led to the fact that Interprombank’s activities were inefficient. In 2020, the bank suffered losses in the amount of 3.9 billion rubles, or 57% of its capital.
The Bank of Russia repeatedly ordered Interprombank to create additional loan loss provisions. Compliance with the above requests revealed sufficient grounds in the bank’s activities calling for action to prevent its insolvency (bankruptcy) since Interprombank’s equity capital declined by over 75% with the simultaneous violation of a number of required ratios. The said circumstances pointed to a real threat to creditors’ and depositors’ interests from the operations of Interprombank.
The Bank of Russia also cancelled Interprombank’s professional securities market participant licence.
The Bank of Russia appointed a provisional administration4 to Interprombank for the period until the appointment of a receiver5 or a liquidator.6 In accordance with federal laws, the powers of the credit institution’s executive bodies were suspended.
Information for depositors: Interprombank is a participant in the deposit insurance system; therefore, depositors will be compensated for their deposits in the amount of 100% of the balance of funds but no more than a total of 1.4 million rubles per depositor (including interest accrued), except for the cases stipulated by Chapter 2.1 of the Federal Law ‘On the Insurance of Deposits with Russian Banks’.
Deposits are to be repaid by the State Corporation Deposit Insurance Agency (hereinafter, the Agency). Depositors may obtain detailed information regarding the repayment procedure 24/7 at the Agency’s hotline
1 According to the financial statements as of 1 April 2021.
2 The Bank of Russia made this decision 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.
3 Depositor means a citizen of the Russian Federation, foreign citizen or person without citizenship, including those who are engaged in entrepreneurial activity, or legal entity specified in Article 5.1 of the Federal Law ‘On the Insurance of Deposits with Russian Banks’, which concluded with a bank a bank deposit/account agreement, or any of the above mentioned persons in whose favour the deposit was made and (or) who is the holder of a savings certificate, or an owner of a special account (special deposit) designed to form and use the fund of capital repairs of common property in an apartment house opened in accordance with the requirements of the Housing Code of the Russian Federation.
4 In accordance with Bank of Russia Order No. OD-692, dated 16 April 2021.
5 In accordance with Articles 127 and 189.68 of the Federal Law ‘On Insolvency (Bankruptcy)’.
6 In accordance with Article 23.1 of the Federal Law ‘On Banks and Banking Activities’.
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16.04.2021 00.00.00