Banking licence of Donkhlebbank revoked and provisional administration appointed
By its Order No. OD-3269, dated 21 December 2018, the Bank of Russia revoked a banking licence from the Rostov-on-Don-based credit institution Public Joint-stock Company Donkhlebbank or PJCB Donkhlebbank (Registration No. 2285) from 21 December 2018. According to its financial statements, as of 01 December 2018, the credit institution ranked 298th by assets in the Russian banking system.
The key activity area of Donkhlebbank was financing complex construction projects executed by the group of companies owned by its primary owner. Difficulties related to the implementation of a number of such projects led to a considerable amount of non-performing assets in the credit institution’s balance sheet. In the course of this year, the supervisor repeatedly identified that the credit institution underestimated the credit risk and overestimated the value of assets in its accounting. The adjustment of the bank’s performance indicators for the amount of additional provisions established a substantial decrease in capital and entailed the need for action to prevent the credit institution’s bankruptcy, which created a real threat to its creditors’ and depositors’ interests.
During 2018, PJCB Donkhlebbank also failed to comply with laws and Bank of Russia regulations on countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism with regard to prompt identifying operations subject to mandatory control, as well as submitting complete and reliable information to the authorised body.
The Bank of Russia repeatedly (4 times over the last 12 months) applied supervisory measures against PJCB Donkhlebbank, including two impositions of restrictions on household deposit taking.
The credit institution’s operations showed signs of misconduct by its executives who sought to withdraw liquid assets to the detriment of creditors’ and depositors’ interests. The Bank of Russia will submit information about the bank’s transactions suggesting a criminal offence to law enforcement agencies.
Under these circumstances, the Bank of Russia took the decision to revoke PJCB Donkhlebbank’s banking licence.
The Bank of Russia took this measure following the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, repeated violations within a 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’ as well as Bank of Russia regulations issued in accordance with the said law and application of the measures stipulated by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’, taking into account a real threat to the interests of creditors and depositors.
Following the banking licence revocation, PJCB Donkhlebbank’s professional securities market participant licence was also cancelled.
By its Order No. OD-3270, dated 21 December 2018, the Bank of Russia appointed a provisional administration to PJCB Donkhlebbank 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 were suspended.
PJCB Donkhlebbank is a member of the deposit insurance system. The revocation of a banking licence is an insured event as stipulated by Federal Law ‘On the Insurance of Household Deposits with Russian Banks’ in respect of the bank’s retail deposit obligations, as defined by law. The said Federal Law provides for the payment of indemnities to the bank’s depositors, including individual entrepreneurs, in the amount of 100% of the balance of funds but no more than a total of 1.4 million rubles per depositor.
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