On revocation of banking licence from credit institution Jugra and appointment of provisional administration
By its Order No. OD-2138, dated 28 July 2017, with effect from 28 July 2017, the Bank of Russia revoked a banking licence from the Moscow-based credit institution Public Joint-stock Company Bank Jugra (Registration No. 880), further referred to as the credit institution.
In its operations, the credit institution was focused on attraction of household funds and their placement into inferior quality assets. At the same time, the credit institution failed to set up loss provisions which would be appropriate to the risks assumed. The Deposit Insurance Agency State Corporation, entrusted in accordance with a Bank of Russia order with the duties of a provisional administration for the credit institution, conducted an assessment of the bank’s financial position. Following this assessment, the fair presentation of asset value in the credit institution’s financial statements showed a full loss of its equity capital.
The credit institution’s business model was based on the funding of business projects related to the credit organisation’s beneficiaries, through extending loans to companies with scales of business inconsistent with the volume of loans issued. The credit institution’s lending operations to individuals were effectively immaterial, neither were those to legal entities unrelated to its owners. The supervisory body had found, on more than one occasion, that some of the credit institution’s operations suggested siphoning off of both assets and liquid collateral, dubious transit transactions, as well as some instances of misreporting and a purely technical approach towards the Bank of Russia’s improvement orders and violations of the regulator-introduced limits. In the course of 2017, the Bank of Russia six times informed the Prosecutor General’s Office of the Russian Federation of established asset siphoning off; it also informed Rosfinmonitoring twice in connection with dubious transit transactions the bank was conducting.
The Bank of Russia repeatedly applied supervisory measures to Public Joint-stock Company Bank Jugra, including restrictions on household deposit taking. The credit institution however continued to pursue an aggressive strategy of attracting household funds, including through a scheme to circumvent regulatory requirements (i.e. depositors were granted the bank’s shares). The credit institution’s steps failed to bring about better financial stability, improve the quality of assets and were formal in nature, aiming to conceal low quality assets.
In the early days of its operations, the provisional administration found that the bank’s reporting manipulations were intended to conceal the real financial position.
According to the Deposit Insurance Agency State Corporation findings, it is not feasible to apply a financial resolution procedure with the use of funds of the Agency’s and the credit institution’s creditors in view of extremely low quality of assets, the amount of disbalance between the value of assets and liabilities and considering that Public Joint-stock Company Bank Jugra is not a systemically important credit institution.
The Bank of Russia does not deem the financial recovery plan submitted by the bank owner to be realistic from the perspective of deadlines, volumes and sources of funding; a number of its items are non-compliant with applicable legislation.
Under these circumstances, the Bank of Russia performed its duty of banking licence revocation in accordance with Article 20 of the Federal Law ‘On Banks and Banking Activities’.
The Bank of Russia took this extreme measure in view of the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, with 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, and given the repeated application, within a year, of measures envisaged by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’.
Following banking licence revocation, the functions of the provisional administration to manage Public Joint-stock Company Bank Jugra, entrusted with the Deposit Insurance Agency State Corporation in accordance with Bank of Russia Order No. ОD-1901, dated 7 July 2017, with effect from 10 July 2017, are terminated pursuant to Bank of Russia Order No. ОD-2139, dated 28 July 2017.
By its Order No. OD-2140, dated 28 July 2017, the Bank of Russia appointed a provisional administration to manage 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.
Public Joint-stock Company Bank Jugra 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 creditor claims of Public Joint-stock Company Bank Jugra (10 July 2017), 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 Public Joint-stock Company Bank Jugra in accordance with Clause 2 Part 1 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.
Information on the authorised agent banks to pay an insurance indemnity can be found on the official website of the Deposit Insurance Agency State Corporation (www.asv.org.ru).
According to the financial statements, as of 1 July 2017, Public Joint-stock Company Bank Jugra ranked 29th by assets in the Russian banking system.
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28.07.2017 00.00.00