By its Order No. OD-1224, dated 31 May 2019, the Bank of Russia revoked a banking licence from Joint-Stock Company Kemerovo Social Innovation Bank, or JSC Kemsocinbank (Registration No. 96, Kemerovo, hereinafter, Kemsocinbank). The credit institution ranked 320th by assets in the Russian banking system1.
The Bank of Russia took this decision in accordance with Clause 6 of Part 1 and Clauses 1, 2 of Part 2, Article 20 of the Federal Law ‘On Banks and Banking Activities’2, based on the facts that Kemsocinbank:
- understated the amount of provisions to be set up, in order to improve its financial indicators and conceal its actual financial standing. The Bank of Russia estimates that an adequate reflection in the credit institution’s financial statements of credit risks taken may lead to a full loss of its equity capital;
- performed ‘scheme’ operations to artificially maintain its capital to formally comply with the required ratios;
- violated federal banking laws and Bank of Russia regulations, making the regulator repeatedly apply supervisory measures over the past 12 months, including the impositions of restrictions on household deposit taking;
- had a fractured ownership structure suggestive of nominal shareholding in the interest of third parties.
The balance sheet of Kemsocinbank contained considerable amounts of low-quality loan debt and non-core assets in the form of real estate which had been received as compensation for unserviced loans. The credit institution concluded numerous ‘scheme’ transactions which allowed it to formally comply with the established capital requirements and required ratios. The above-mentioned transactions, along with the inferior quality of the considerable part of the loan debt, were revealed in the course of the Bank of Russia’s inspection. At a result of the inspection, the bank received an order to make a proper assessment of risks assumed and to reflect its financial standing in the financial statements.
The Bank of Russia will submit information about the bank’s transactions suggesting a criminal offence to law enforcement agencies.
The Bank of Russia appointed a provisional administration3 to Kemsocinbank 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: Kemsocinbank 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 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 May 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, all equity capital adequacy ratios below two per cent, decrease in the bank’s equity capital below the minimum value of the authorised capital established as of the date of the state registration of the credit institution, 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)’, and taking into account a real threat to the interests of creditors and depositors.
3 In accordance with Bank of Russia Order No. OD-1225, dated 31 May 2019.
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’.