By its Order No. OD-1640, dated 9 October 2020, the Bank of Russia revoked a banking licence from Bank Prohladnyj (Limited Liability Company), or Bank Prohladnyj LLC (Registration No. 874, Kabardino-Balkar Republic, city of Prohladnyj; hereinafter, Bank Prohladnyj). The credit institution ranked 348th by assets in the Russian banking system.1
The Bank of Russia took this decision in accordance with Clause 6 of Part 1 of Article 20 of the Federal Law ‘On Banks and Banking Activities’,2 based on the facts that Bank Prohladnyj:
- violated federal banking laws and Bank of Russia regulations, and also understated the amount of loan loss provisions to be created, due to which the regulator repeatedly applied measures against it over the past 12 months, which included restrictions on household deposit-taking;
Over 70% of the loan portfolio of Bank Prohladnyj are represented by bad loans. The Bank of Russia repeatedly requested Bank Prohladnyj to create additional loss provisions. Compliance with the above requests revealed sufficient grounds in the bank’s activities calling for action to prevent its insolvency (bankruptcy), which created a real threat to its creditors’ and depositors’ interests.
Moreover, the bank was engaged in scheme operations to conceal the level of overdue debt and to create interest income. The Bank of Russia will submit information about the above activities to law enforcement agencies.
The Bank of Russia appointed a provisional administration3 to Bank Prohladnyj for the period until the appointment of a receiver4 or a liquidator5. In accordance with federal laws, the powers of the credit institution’s executive bodies were suspended.
Information for depositors: Bank Prohladnyj is a participant in the deposit insurance system; therefore, depositors will be compensated6 for their deposits in the amount of 100% of the balance of funds but no more than a total of 1.4 million rubles per depositor (including interest accrued), except for the cases stipulated by Chapter 2.1 of the Federal Law ‘On the Insurance of Deposits with Russian Banks’.
Deposits are to be repaid by the State Corporation Deposit Insurance Agency (hereinafter, the Agency). Depositors may obtain detailed information regarding the repayment procedure 24/7 at the Agency’s hotline (8 800 200-08-05) and on its website (https://www.asv.org.ru/) in the Deposit Insurance / Insurance Events section.
1 According to the financial statements as of 1 January 2020.
2 The Bank of Russia takes this extreme measure because of the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, due to repeated application within a year of measures envisaged by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’, considering a real threat to the creditors’ and depositors’ interests.
3 In accordance with Bank of Russia Order No. OD-1641, dated 9 October 2020.
4 In accordance with Articles 127 and 189.68 of the Federal Law ‘On Insolvency (Bankruptcy)’.
5 In accordance with Article 23.1 of the Federal Law ‘On Banks and Banking Activities’.
6 Depositor means a citizen of the Russian Federation, foreign citizen or person without citizenship, including those who are engaged in entrepreneurial activity, or legal entity specified in Article 5.1 of the Federal Law ‘On the Insurance of Deposits with Russian Banks’, which concluded with a bank a bank deposit/account agreement, or any of the above mentioned persons in whose favour the deposit was made and (or) who is the holder of a savings certificate, or an owner of a special account (special deposit) designed to form and use the fund of capital repairs of common property in an apartment house opened in accordance with the requirements of the Housing Code of the Russian Federation.