Banking licence of Bank PERVOMAISKY revoked and provisional administration appointed
By its Order No. OD-3035, dated 23 November 2018, the Bank of Russia revoked the banking licence of the Krasnodar-based credit institution Bank PERVOMAISKY (Public Joint-stock Company) Bank PERVOMAISKY (PJSC) (Registration No. 518) from 23 November 2018. According to the financial statements, as of 1 November 2018, the credit institution ranked 204th by assets in the Russian banking system.
The business model of Bank PERVOMAISKY (PJSC) was aimed at lending to legal entities and individuals including those affiliated with the bank. These operations were financed from borrowed household funds (approx. 70% of liabilities). That said, low-quality outstanding loans accounted for more than 40% of the loan portfolio. As the credit institution has consistently underestimated credit risk assumed, the Bank of Russia has repeatedly requested that it create additional provisions for possible losses. The due diligence check of credit risk at the regulator’s request established a substantial decrease in capital and entailed the need for action to prevent the credit institution’s insolvency (bankruptcy), which created a real threat to its creditors’ and depositors’ interests.
Also, Bank PERVOMAISKY (PJSC) repeatedly violated laws and Bank of Russia regulations on countering the legalisation (laundering) of criminally obtained incomes and the financing of terrorism with regard to the timely submission and accuracy of information the credit institution submitted to the authorised body including about operations subject to obligatory control. Besides, the bank conducted dubious transit operations.
The Bank of Russia repeatedly (4 times over the last 12 months) applied supervisory measures against Bank PERVOMAISKY (PJSC), including two impositions of restrictions on household deposit taking. At the same time, the credit institution systemically violated caps on liabilities to households, imposed by the supervisor to protect depositors’ interests.
Under these circumstances, the Bank of Russia took the decision to revoke the banking licence of Bank PERVOMAISKY (PJSC).
The Bank of Russia made this decision because of the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, repeated violations within a year of requirements stipulated by Article 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 banking licence revocation, the professional securities market participant licence of Bank PERVOMAISKY (PJSC) was cancelled.
By its Order No. OD-3036, dated 23 November 2018, the Bank of Russia appointed a provisional administration to Bank PERVOMAISKY (PJSC) for the period until the appointment of a receiver pursuant to the Federal Law ‘On the 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.
Bank PERVOMAISKY (PJSC) 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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