Russia cancels leading bank's license for first time

5th October 2010, Comments 0 comments

The Russian central bank on Tuesday said it was cancelling the license of a leading commercial bank for the first time since the financial crisis broke in 2008.

The International Industrial Bank (IIB), controlled by Russian tycoon Sergei Pugachev, was losing its license for violating a string of regulations, the Russian Central Bank said in a statement on its website.

The IIB had failed to report accurate data on its accounts and had been unable to satisfy its obligations towards creditors, the bank said.

According to the Interfax news agency, the bank was the 30th largest bank in Russia by assets and defaulted on 200 million euros in eurobonds earlier this year.

"The Bank of Russia in a decree has withdrawn the license of the International Industrial Bank (IIB) for banking," the statement said.

An administrator has been appointed pending a court ruling on whether the bank should be declared bankrupt.

Pugachev is also a member of Russia's upper house of parliament, the Federation Council, where he represents the remote Siberian region of Tuva.

"We do not expect the license withdrawal to affect the Russian banking system," Deputy Finance Minister Alexei Savatyugin said, confirming that IIB was the first major Russian bank to be stripped of its license since the financial crisis.

"Yes, this is a big bank, a significant one in the context of the country, but it hardly has any retail deposits," Interfax quoted him as telling an economic conference in Moscow.

"Many of its clients are affiliated with the owner, so the consequences can be predicted and we're not expecting the license withdrawal to have a major impact on the state of the banking system, industry and finance," Savatyugin said.

He said the central bank had tried to save IIB through a debt restructuring but added that for this to work there needed to be a "two-way desire."

Analysts have long warned that Russia faces a major shake-out of its banking sector as smaller institutions grapple with the consequences of their bad loan portfolios.

© 2010 AFP

0 Comments To This Article