On an informal banking group’s operations

The Bank of Russia, in the course of its supervisory action, detected a group of banks which is not a banking group per se within the meaning of Article 4 of the Federal Law ‘On Banks and Banking Activity’, but is an entity with operations indicative of servicing the interests of only a limited number of the same individuals.

This Group comprises Commercial Bank Antalbank LLC, CJSC Commercial Bank LADA-CREDIT, LLC Commercial Bank DORIS-BANK, JSC Greenfieldbank, OJSC Bank SODRUZHESTVO, LLC Commercial Bank MRB, LLC Commercial Bank RBS, JSC NST-BANK and OJSC Joint-stock Commercial Bank Maximum (hereinafter referred to as ’the Group’).

The individual banks within the Group shared among themselves owners and managers, with their intrabank financial flows suggesting close economic ties between them.

All Group banks pursued aggressive marketing strategies aimed at attracting household funds; they set interest rates significantly above market, and the funds attracted were allocated in low quality assets.

Pursuant to the requirements of Article 74 of the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’, the Bank of Russia was enforcing limits on the amounts of the funds to be paid in deposits in the banks whose operations threatened to creditors and depositors’ interests. However, as such limits were enacted at some Group banks, the other banks ramped up their deposit-taking activities.

Individual banks within the Group conducted deposit-taking in violation of the enacted prohibitions and restrictions. For instance, the provisional administration, in the course of its operations, found that JSC NST BANK accounted its large-scale deposit-taking retroactively, in an attempt to look formally compliant with the BoR-enforced stop of such transactions.

The combination of the above actions resulted in the total Group banks’ liabilities to depositors, as of the respective banking licence revocation dates (the licenses were revoked between September and November 2015), amounted to about 40 billion rubles.

The bulk of household funds (except for JSC AKB Maximum) were transferred through mutual correspondent accounts and interbank credits to LLC Commercial Bank Antalbank, as the Group’s parent bank; the latter in its turn, was siphoning them off in favour its subsidiary companies. Practically all loans provided by LLC Commercial Bank Antalbank (to a total of, as of the licence revocation date, 14.7 billion rubles), debt servicing by borrowers was stopped once the license was revoked.

Most assets similar in quality are carried in other Group banks, which bears evidence that the banks’ former management and owners knowingly withdrew from banks funds borrowed from households.

The information on financial transactions indicative of criminal acts as carried out by the former executives and owners was submitted by the Bank of Russia to the Office for Prosecutor General of the Russian Federation, the Ministry of Internal Affairs of the Russian Federation and the Investigative Committee of the Russian Federation, for review and procedural decision-making.

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