By its Order No. OD-6, dated 10.01.2020, the Bank of Russia revoked the banking licence from the Moscow-based Commercial Bank Necklace-Bank, Ltd (Necklace-Bank, Ltd) (Reg. No. 1671; hereinafter, Necklace-Bank). The credit institution ranked 251st by assets in the Russian banking system1.
The Bank of Russia took this decision in accordance with Clause 6, Part 1 and Clauses 1 and 2, Part 2, Article 20 of the Federal Law ‘On Banks and Banking Activities’2, based on the facts that Necklace-Bank:
- Fully lost its equity due to additional provisioning for a range of assets.
- Conducted operations that suggest the intention to siphon off funds.
- Violated federal banking laws and Bank of Russia regulations, due to which the regulator repeatedly applied supervisory measures against it over the last 12 months, which include restrictions on retail deposit-taking.
The asset replacement operations resulted in a portfolio of potentially unrecoverable retail loans totalling over 1.3 billion rubles that formed on the credit institution’s balance sheet. The said retail lending transactions had signs of attempts to siphon off funds, prejudicing the interests of creditors and depositors. The Bank of Russia sent an order to the credit institution to carry out an adequate assessment of the risks accepted and to reflect its actual financial standing in its reporting. As a result, the credit institution’s statements showed a full loss of its equity (capital).
The Bank of Russia submitted the information on the bank’s operations having signs of criminal acts to the law enforcement authorities.
The Bank of Russia also cancelled Necklace-Bank’s professional securities market participant licence.
The Bank of Russia appointed a provisional administration3 to Necklace-Bank 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: Necklace-Bank is a participant in the deposit insurance system; therefore, depositors6 will be compensated 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).
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 December 2019.
2 The Bank of Russia took this decision because of the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, equity (capital) adequacy ratios 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 the measures envisaged by the Federal Law ‘On the Central Bank of the Russian Federation (Bank of Russia)’.
3 In accordance with Bank of Russia Order No. OD-7, dated 10 January 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 Depositors mean individuals, including those who are engaged in entrepreneurial activity (individual entrepreneurs), and legal entities that are considered small businesses in accordance with the Federal Law ‘On the Development of Small and Medium-sized Enterprises in the Russian Federation’.