By its Order No. OD-474, dated 7 March 2019, the Bank of Russia revoked the banking licence from the Ufa-based credit institution ROSCOMSNABBANK (public joint-stock company) or ROSCOMSNABBANK (PJSC) (Registration No. 1398) from 7 March 2019. According to its financial statements, as of 1 February 2019, the credit institution ranked 132nd by assets in the Russian banking system.
The main business line of ROSCOMSNABBANK (PJSC) was financing construction projects through lending to companies owned by business partners of the bank’s ultimate owners and their affiliates. This business model was mainly financed with funds raised from households. The Bank of Russia worked with the credit institution to mitigate the assumed risks, and the bank developed an asset diversification plan. As a result of the bank’s actual incompliance with the planned benchmarks, construction project lending exceeded the capital of ROSCOMSNABBANK (PJSC) more than three-fold.
The bank’s activities bore the signs of unfair practice on the part of its management associated with the bank’s participation in operations of its corporate customers aimed at raising household funds with their subsequent repayment in accordance with the Ponzi scheme. The credit institution accepted household funds for corporate customers at an elevated interest rate (crowdfunding platform); these funds were ultimately used in lending to a number of companies. Retail liabilities on such investments were actually redeemed from newly raised household funds. This activity was accompanied by an aggressive regional promotional campaign. In this context, the Bank of Russia launched an unscheduled inspection of ROSCOMSNABBANK (PJSC).
The Bank of Russia submitted information about the bank’s transactions bearing the signs of a criminal offence to law enforcement agencies.
The balance sheet of ROSCOMSNABBANK (PJSC) accumulated a significant volume of non-performing assets. As the credit institution consistently underestimated credit risk assumed, the Bank of Russia repeatedly requested that it create additional loss provisions. In order to conceal its real financial standing and artificially maintain the capital to formally comply with the required ratios, ROSCOMSNABBANK (PJSC) performed opaque transactions. The Bank of Russia revealed a full loss of equity capital by the credit institution should the credit exposure from the debt on loans be adequately assessed.
The Bank of Russia repeatedly (4 times over the last 12 months) applied supervisory measures against ROSCOMSNABBANK (PJSC), including impositions of restrictions on household deposit taking.
Under these circumstances, the Bank of Russia took the decision to revoke the banking licence from ROSCOMSNABBANK (PJSC).
The Bank of Russia took this measure following the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations, repeated violations within a year of the requirements stipulated by Articles 6 and 7 (excluding Clause 3 of Article 7) of the Federal Law ’On Countering the Legalisation (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism’ as well as Bank of Russia regulations issued in accordance with the said law and application of the measures stipulated by the Federal Law ’On the Central Bank of the Russian Federation (Bank of Russia)’, taking into account a real threat to the interests of creditors and depositors.
Following the banking licence revocation, the professional securities market participant licence of ROSCOMSNABBANK (PJSC) was also cancelled.
By its Order No. OD-475, dated 7 March 2019, the Bank of Russia appointed a provisional administration to ROSCOMSNABBANK (PJSC) 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 were suspended.
ROSCOMSNABBANK (PJSC) is a member of the deposit insurance system. The revocation of a banking licence is an insured event as stipulated by Federal Law ‘On the Insurance of Deposits with Russian Banks’ in respect of the bank’s deposit obligations. This Federal Law stipulates the procedure and amount of insurance indemnities to the bank’s depositors.