Russian central bank revokes Laiki unit’s licence (Update-2)

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(Adds more Sykala comment in sixth paragraph)

By Stelios Orphanides

The Central Bank of Russia has revoked the banking licence of Rosprombank, a unit of legacy Laiki, citing its failure to comply with the country’s legislation, including money laundering and terrorism financing, a further blow to stricken depositors who asked Cypriot stakeholders to resign.

The decision to revoke the Rosprombank’s licence prompted Sykala, a group representing the interests of Laiki depositors who lost all their deposits in excess of €100,000 in Cyprus’s March 2013 banking crisis, to criticise Cypriot authorities, including the Central Bank of Cyprus and parliament, for not putting forward and passing a bill granting them control over its remaining assets.

“For yet another time, you squandered others’ wealth,” the group was quoted as saying by the Cyprus News Agency. “If we were you, we would file our resignation immediately. Have you thought about it at all?”

The licence revocation proved, according to Sykala, that the Central Bank of Cyprus was wrong when it advised against passing the proposed legislation on the grounds that depositors’ interests would be better served that way, Sykala said.

The Central Bank of Cyprus and the administrator Chris Pavlou were not immediately available for a comment.

Adonis Constantinou, a representative of Sykala, the group representing depositors of Cyprus Popular Bank, as Laiki was officially known, said that the value of defunct Laiki assets which stood at €900m in March 2013, had fallen few days ago to below €300m. The latest figure, he said, does not include the impact from the revocation of Rosprombank’s licence.

The Russian Central Bank justified this “extreme measure because of the credit institution’s failure to comply with federal banking laws and Bank of Russia regulations,” it said in a statement on its website on Tuesday.

Russia MoscowRosprombank, which is the short form of the Rossiysky Promyshlenny Bank, or Russian Industrial Bank, repeatedly violated the provisions of Russia’s “federal law on countering the legalisation (laundering) of criminally obtained revenues, and financing of terrorism” and requirements stemming from the supervisory authority’s “regulations and the application of measures envisaged by the federal law on the Central Bank of the Russian Federation,” the Russian supervisor said. It added that it also took into account “the existence of a real threat to the interests of its creditors and depositors”.

News of the decision prompted SYKALA, a group representing the interests of Laiki depositors who lost all their deposits in excess of €100,000 in Cyprus’s March 2013 banking crisis, to criticise Cypriot authorities, including the Central Bank of Cyprus and parliament, for not putting forward and passing a bill granting them control over its remaining assets.

The licence revocation proves that the Central Bank of Cyprus was wrong when it advised against passing the proposed legislation on the grounds that depositors’ interests would be better served that way, Sykala said, according to the Cyprus News Agency.

“For yet another time, you squandered others’ wealth,” the group was quoted as saying. “If we were you, we would file our resignation immediately. Have you thought about it at all?”

The Central Bank of Cyprus and the administrator Chris Pavlou were not immediately available for a comment.

The unit carried out a “high-risk lending policy,” which involved placements in poor quality assets, and failed to provide adequate information to authorities related to its anti-money laundering practices, the Russian supervisor said. “Rosprombank’s internal control rules in the said area were at odds with Bank of Russia requirements. Both management and owners of the credit institution did not take any effective measures to bring its activities back to normal”.

“The adequate risk assessment at the supervisor’s request and a reliable recognition of the bank’s assets resulted in the grounds for the credit institution to implement insolvency prevention measures,” the Russian Central Bank continued, adding that on Tuesday, it had appointed a provisional administrator.

“In accordance with federal laws, the powers of the credit institution’s executive bodies are suspended.”

As Rosprombank is a part of Russia’s deposit insurance system, “the revocation of the banking licence is an insured event” as stipulated by the country’s legislation which provides for the compensation with up to €1.4m roubles (€19,175) per depositor.

“According to the financial statements, as of September 1, 2016, Rosprombank ranked 323rd by assets in the Russian banking system,” the Russian Central Bank said.

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