The Bank of Russia has revoked effective August 18, 2016 a banking license held by BaikalBank (based in Ulan-Ude), the regulator's press service reported.
The decision to take the last-resort measure was adopted because the lending institution failed to fulfill federal banking laws and also the Bank of Russia's statutory acts, capital adequacy ratios dropped below 2%, and equity declined beneath the minimum charter capital as set on the day of the lending institution's state registration, the regulator noted. Also, the Bank of Russia took into consideration the multiple application to the bank during one year of the measures provided for in the Federal Law "On the Central Bank of the Russian Federation (Bank of Russia)".
"While investing funds in the unsatisfactory quality assets BaikalBank inadequately assessed related risks. Upon fulfillment of the supervisory body's demand about the proper assessment of accepted credit risks the bank lost its equity (capital) in full," the regulator pointed out.
BaikalBank executives and owners did not take efficient and sufficient measures to normalize its activities, while those that they declared to restore the bank's financial stability yielded no satisfactory results, the Bank of Russia thinks. "In addition, this August after the supervisory body imposed a restriction on BaikalBank the bank's executives and owners conducted operations and transactions to get assets out of it," the regulator said.
"Under the circumstances, the Bank of Russia fulfilled its obligation to revoke BaikalBank's banking license as established in Part 2 of Article 20 of the Federal Law "On Banks and Banking Activities", the regulator said in the press release.
Temporary administration was appointed at BaikalBank until an administrator or a receiver is appointed. The powers and authority of the bank's executive bodies were suspended.
BaikalBank is a member of the national deposit insurance system. The revocation of a license is an insured event that stipulates insurance indemnity to be paid to the bank's deposit holders, including individual entrepreneurs, in the amount of 100% of balances held on accounts, but no more than Rub 1.4 mln in the aggregate per deposit holder.
Banki.ru previously wired that on August 5, 2016 BaikalBank's head office and two branches were cut off the Banking Electronic Speedy Payment (BESP) system. Also, the Bank of Russia imposed 6-month restrictions on most of the bank's banking operations on August 5, 2016.
The bank filed a lawsuit with the Arbitration Tribunal of the Republic of Buryatia against the Bank of Russia seeking recognition of the regulator's restrictions as unjustified and violating the rights of the bank and its customers. At the same time, the lending institution requested to remove Rub 10,000 limit imposed on a number of operations.
On August 9, 2016 the court ruled that "transactions executed by the lending institution pose a real threat to the interests of the bank's creditors and deposit holders", and for this reason the court of arbitration refused to uphold the bank's lawsuit to repeal the regulator's orders. However, on August 11, 2016 the court made advances and suspended the application of the regulator's orders.
On August 11, 2016 the court issued a writ of execution to fulfill the court's ruling by force. However, the bank was not connected to the payment system. On Wednesday, August 17, the Russian Legal Information Agency (RAPSI) said that BaikalBank filed a motion to the Arbitration Tribunal of the Republic of Buryatia to charge a penalty of Rub 100,000 from the Bank of Russia for its failure to fulfill the ruling on taking security measures.
