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© RIA Novosti. Evgeny Biyatov

Russian regulator shuts three more banks in crackdown

by RIA Novosti at 13/12/2013 15:32

Russia’s financial regulator revoked the banking licenses of three mid-sized banks Friday as authorities expand a banking sector crackdown.

The operations of Investbank, Russia’s 84th largest bank by assets according to finance website allbanks.ru, BPF Bank, the country’s 142nd biggest bank, and Smolensk Bank, the 109th largest bank, were all suspended, according to statements by Bank Rossii, Russia’s central bank.

Insurance payments to clients of the three banks, which will begin on December 27, will total 51 billion rubles ($1.6 billion), Russia’s Deposit Insurance Agency said Friday.

Almost 30 Russian banks have lost their licenses this year as the regulator seeks to tighten oversight of the country’s lenders and rein in shadow banking activity.

The central bank said that Investbank was guilty of false financial reporting and inadequate capital levels, while BPF was a threat to creditors due to its high-risk borrowing.

Smolensk Bank had not observed its obligations to creditors and depositors, while simultaneously “engaging in deals aimed at asset stripping,” according to the central bank.

The central bank’s move did not come out of the blue, with all three banks reportedly under financial pressure in recent days and weeks.

Investbank’s offices temporarily suspended operations in Russia’s westernmost region of Kaliningrad on Thursday after what the bank described in a statement as the “unfounded panic of depositors.”

BPF has had problems honoring obligations since November. Smolensk Bank has also had liquidity problems, and earlier this month requested financial assistance from the central bank.

In November the central bank revoked the license of major Moscow-based lender Master Bank, causing widespread problems with payment transactions across the country. The regulator said that Master Bank had been involved in money laundering and “large-scale suspicious operations.”

Elvira Nabiullina, who was appointed as chairman of Bank Rossii earlier in June, has made a campaign against shadowy banking activity a key part of her agenda for the regulator.

The crackdown has caused widespread unease, and experts have predicted that it could precipitate a flood of new customers for the large state-owned banks that dominate the banking sector.

Following the demise of Master Bank, Nabiullina warned lawmakers it was not the only bank in such a precarious situation and that more license revocations were likely to follow.

President Vladimir Putin expressed his support for the crackdown during his annual State of the Nation address Thursday. “We must continue our principled and firm approach to rescuing our financial-credit system from various money laundering operations,” he told top officials and businessmen.

Outgoing central bank chairman Sergei Ignatyev told Russia’s Vedomosti newspaper in February that Russia lost about $49 billion in illicit capital flight in 2012 that includes tax avoidance, bribes and payments for illegal narcotics.

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