On revocation of banking licence from Public Joint-stock Company United Financial Capital Bank and appointment of provisional administration
By its Order No. OD-953, dated 16 April 2018, effective from the same date, the Bank of Russia revoked the banking licence of the Moscow-based credit institution Public Joint-stock Company United Financial Capital Bank, or UFC Bank PJSC (Registration No. 2270), further referred to as the credit institution. According to the financial statements, as of 1 April 2018, the credit institution ranked 127th by assets in the Russian banking system.
Problems in the credit institution’s operations owe their origin to the use of a risky business model focused on loans to production and distribution companies of the alcohol industry. The credit institution provided financing to related companies within the sector through a variety of schemes intended to create the appearance of formal compliance with Bank of Russia prudential regulations. The Deposit Insurance Agency State Corporation, entrusted in accordance with a Bank of Russia order with the duties of a provisional administration to manage the credit institution, conducted an assessment of the bank’s financial position, which established a complete loss of capital by the credit institution.
Furthermore, the operations of the credit institution were found multiple times to be non-compliant with the law and Bank of Russia regulations on countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism as long as the credit institution failed to comply with the obligation of detecting operations subject to obligatory control and failed to provide to the authorised body reliable information in time.
The Bank of Russia repeatedly applied supervisory measures against the credit institution, including two impositions of restrictions on household deposit taking.
The credit institution’s management and owners failed to take any effective measures to normalise its activities. More so, the credit institution’s financial instability occurred in part on the back of a shareholder conflict, resulting in its major borrowers’ failure or inability to serve their liabilities to the credit institution.
According to the Deposit Insurance Agency State Corporation findings, it is not feasible to apply to the credit institution a financial resolution procedure in view of extremely low quality of its assets, a significant disbalance between the value of assets and liabilities as well as due to the credit institution’s inability to meet its creditors’ claims at any time thereafter.
Under these circumstances, the Bank of Russia performed its duty of revoking a banking licence from the credit institution in accordance with Article 20 of the Federal Law ‘On Banks and Banking Activities’.
The Bank of Russia took this decision because of the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, repeated violations within one year of the requirements stipulated by Articles 6 and 7 (excluding Clause 3 of Article 7) of the Federal Law ‘On Countering the Legalisation (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism’ and Bank of Russia regulatory requirements issued in accordance with the said law, all equity capital adequacy ratios being below two per cent, decrease in bank equity capital below the minimum value of the authorised capital established as of the date of the state registration of the credit institution, 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)’.
Following this banking licence revocation, the credit institution’s professional securities market participant licence was cancelled. Furthermore, in accordance with Bank of Russia Order No. ОD-954, dated 16 April 2018, the activities of the provisional administration to manage the credit institution were terminated (the provisional administration was appointed in accordance with Bank of Russia Order No. OD-693, dated 21 March 2018).
By its Order No. OD-955, dated 16 April 2018, the Bank of Russia appointed a provisional administration to the credit institution for the period until the appointment of a receiver pursuant to the Federal Law ‘On Insolvency (Bankruptcy)’ or a liquidator under Article 23.1 of the Federal Law ‘On Banks and Banking Activities’. In accordance with federal laws, the powers of the credit institution’s executive bodies have been suspended.
UFC Bank PJSC is a member of the deposit insurance system. An insured event shall be deemed as occurring starting from the date of the moratorium on meeting the claims of the credit institution’s creditors (21 March 2018), which shall also be the date used for calculation of insurance indemnity for the bank’s liabilities in foreign currency.
The revocation of the banking licence, put in force before the moratorium on meeting creditor claims expires, shall not cancel the obligation of the Deposit Insurance Agency State Corporation to pay out insurance indemnity.
The Agency will continue to pay out insurance indemnity for deposits (deposit accounts) with the credit institution in accordance with Clause 2 of Part 1 of Article 8 of the Federal Law ‘On the Insurance of Household Deposits with Russian Banks’ — imposition by the Bank of Russia of the moratorium on meeting creditor claims — until the completion of bankruptcy proceedings.
Information on the agent banks authorised to pay an insurance indemnity can be found on the official website of the Deposit Insurance Agency State Corporation (www.asv.org.ru).
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