On the revocation of banking licence and appointment of provisional administration

By Order No. OD-328, dated 18 March 2014, the Bank of Russia revoked the banking licence of the Moscow-based credit institution Joint-Stock Commercial Bank of Saving and Credit, a closed joint-stock company (CJSC S Bank), from 18 March 2014.

The Bank of Russia took such an extreme measure — revocation of the banking licence — because of S Bank’s failure to comply with federal banking laws and Bank of Russia regulations. The capital adequacy ratio of this credit institution is below 2%, while its equity capital has dropped down below the minimum authorised capital established by the Bank of Russia as of the day of the state registration of the credit institution. While making this decision the Bank of Russia also took into account the repeated application over the past year of measures envisaged by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’. In compliance with Article 20 of the Federal Law ‘On Banks and Banking Activities’, the Bank of Russia has performed its duty to revoke the banking licence of CJSC S Bank.

S Bank implemented a highly risky policy with regard to the placement of borrowed funds and failed to make loss provisions commensurate with the risks assumed. As a result of the fulfillment of the supervisor’s requirements to make adequate provisions for low-quality assets, the credit institution lost its equity capital in full. The management and owners of CJSC S Bank failed to take measures on its financial rehabilitation.

In pursuance of Bank of Russia Order No. OD-329, dated 18 March 2014, a provisional administration has been appointed to the credit institution for a term until the appointment of a receiver in accordance with the Federal Law ‘On the Insolvency (Bankruptcy) of Credit Institutions’ or a liquidator in accordance with Article 23.1 of the Federal Law ‘On Banks and Banking Activities’. In compliance with federal laws the powers of the credit institution’s executive bodies have been suspended.

CJSC S Bank is a participant in the deposit insurance system. The revocation of the banking licence is recognised as an insured event stipulated by Federal Law No. 177-FZ ‘On Insurance of Household Deposits in Russian Banks’ with regard to the bank’s obligations to honour household deposits identified in accordance with the procedure established by law.

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