Banking licence of JSC KS BANK revoked
By its Order No. OD-1649, dated 6 August 2021, the Bank of Russia revoked the banking licence of the Saransk-based Joint Stock Company KS BANK, or JSC KS BANK (Reg. No. 1752; hereinafter, KS BANK). The credit institution ranked 176th 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 KS BANK:
- understated the amount of loan loss provisions to be set up 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 three cases of restrictions on household deposit-taking.3
KS BANK focused on serving the interests of its owners and their related companies accounting for a significant portion of the loan portfolio. At the same time, over 50% of such companies’ outstanding debt was problem loans. Notwithstanding the low quality of its loan portfolio, KS BANK performed transactions to artificially maintain its equity capital in order to formally comply with prudential requirements.
The Bank of Russia sent an order to KS BANK to make a proper assessment of risks assumed by it and to recognise its real financial standing in its financial statements. The credit institution’s efforts to fulfil this order resulted in the emergence of grounds for implementing measures to prevent its insolvency (bankruptcy). The said circumstances pointed to a real threat to creditors’ and depositors’ interests from the operations of KS BANK.
The Bank of Russia appointed a provisional administration4 to KS BANK 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: KS BANK is a participant in the deposit insurance system; therefore, its 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), taking into account the conditions 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 July 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-1650, dated 6 August 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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06.08.2021 00.00.00