By John Helmer, Moscow
The collapse of Otkritie Bank last month is the largest Russian bank failure since the collapse of National Bank Trust in December 2014. The Central Bank rescue of Trust made inevitable the much more costly bailout of Otrkitie, announced a fortnight ago on August 29, charges Ilya Yurov, the former control shareholder and chief executive of Trust, speaking from exile in the UK.
The reason, according to Yurov, is “the dishonest and deliberately malicious actions of the management and shareholders of Otkritie Bank, and also, unfortunately, a number of officials of the Central Bank of Russia and the Deposit Insurance Agency.” The state organizations, Yurov alleges, “continue to adopt dishonest practices when initiating their processes of ‘financial rehabilitation’ or the prevention of bankruptcy of the Russian banks, which inevitably lead to the violation of the rights of customers and bank lenders, and significantly worsen the situation of the financial industry as a whole.”
Bank analysts and investors in the Russian banks say the combination of failures reveals grave weaknesses in the Central Bank’s supervision. “The black holes in the Russian banking system are expanding,” believes a London banking source. “The more money the Central Bank lends to stop bankruptcy, the faster the cash disappears. Sooner or later, the falling dominoes will come down on [Central Bank Governor Elvira] Nabiullina [lead image] herself.”
Between December 2014 and May 2015 the Central Bank loaned Rb127 billion ($1.7 billion) to Otkritie for the takeover of Trust in what Russian bankers call a “sanitation” – a state funded bailout, administered by the Deposit Insurance Agency (DIA) which stops short of bankruptcy, court-ordered administration, or liquidation.
Then late last month, after Otkritie depositors lost confidence in the bank and withdrew Rb693 billion ($11.6 billion) from Otkritie accounts in June, July, and August, the Central Bank topped the senior management and board, froze transactions, and commenced fresh lending to preserve Otkritie’s solvency. In exchange for the new cash, the Central Bank now owns 75% of the bank’s shares. Over the coming weeks, from Rb250 billion ($4.3 billion) to Rb400 billion ($6.9 billion) will be the Central Bank bailout required, a deputy governor at the bank announced on September 1.
Yurov has been charged in Russia with defrauding Trust, triggering the bank’s failure after related-party lending to a network of offshore companies, which Yurov controlled, drained the bank of its cash. Up to $1 billion has been reported as unaccounted for, if not exactly lost. Early this year two of Yurov’s subordinates at the bank were tried and convicted of embezzlement from the bank, using fake loan papers.
In London and New York Yurov is counter-charging the now ousted chief executive and control shareholder of Otkritie, Vadim Belyaev, and the next most powerful shareholder on the Otkritie board, Ruben Aganbegyan, with conspiracy to attack Trust, push it into sanitation, and withdraw Trust’s cash for themselves through Otkritie. Yurov is also accusing three Central Bank officials at the time of being participants in the cash-and-grab conspiracy.
“Yurov is not a credible accuser,” a Central Bank veteran commented in Moscow. “As the old Russian saying has it, Вор у вора дубинку украл – a thief is stealing a bludgeon from another thief.” (more…)