By its orders (#OD-647 and #OD-645 dated October 8, 2009) the Bank of Russia has revoked banking licenses held by Moscow-based lending institutions Bank Vzaimny and Libra Bank, the PR department of the Central Bank of the Russian Federation reported.
Bank Vzaimny’s license was cancelled due to its failure to comply with federal banking laws and also CBR statutory acts, numerous violations during the year of requirements provided for by Article 6 and Article 7 (other than Article 7.3.) of the Federal Law “On Counteracting Legalization (Laundering) of Crime Income and Financing of Terrorist Acts”, identified instances when the lender substantially misstated its financials, in view of a decline in the lending institution’s own funds (equity capital) below the minimal threshold of the charter capital as established on the date of the lending institution’s state registration, and also taking into account the numerous application of supervisory procedures provided for by the Federal Law “On the Central Bank of the Russian Federation (the Bank of Russia)”.
The central bank noted that the lending institution failed to form adequate reserves for possible loan losses, did not comply with mandatory ratios and the procedure for forming mandatory reserves at the Bank of Russia, forwarded in an untimely manner reports to the Federal Service for Financial Monitoring about operations that are subject to mandatory supervision. In addition, the lender submitted unreliable financials statements to the Bank of Russia that concealed reasons for measures needed to be taken to prevent insolvency (bankruptcy).
Libra Bank’s license was cancelled due to the non-fulfillment of federal laws regulating banking activities and CBR statutory acts, identified instances when the bank provided unreliable financials, the non-compliance with the requirements for the amount of the own funds (equity capital) as stipulated by Article 11.2 of the Federal Law “On Banks and Banking Activities” and also the application on numerous occasions of the measures envisaged by the Federal Law “On the Central Bank of the Russian Federation (Bank of Russia)”.
What’s more, the central bank said in the press release that the lender did not form any adequate reserves for possible loan losses, violated mandatory ratios and also submitted unreliable reports to the Bank of Russia. Within three months of 2009 it allowed its own funds (equity capital) to fall below the amount it recorded as of January 1, 2007. The bank took no measures prescribed by law to lift its equity to the level recorded on January 1, 2007, nor submitted a request to the Bank of Russia seeking to have its status changed to a non-banking lending institution.
Temporary administration teams were appointed for both banks until appointment of receivers in accordance with the Federal Law “On Insolvency (Bankruptcy)” or liquidators in line with Article 23.1 of the Federal Law “On Banks and Banking Activities”. In accordance with the federal laws the powers and authority of the lending institutions’ executive bodies were suspended.
