Lender Loses License Over Liquidity Woes

The Central Bank on Friday withdrew the operating license of Eurasia-Center Bank, citing the lender's liquidity problems and violations of banking regulations.

"As a result of the loss of liquidity, Eurasia-Center could not settle with its clients in a timely manner," the Central Bank said in a statement posted on its web site Friday.

Eurasia-Center Bank had also violated some regulations, including giving inaccurate financial reports to prevent the Central Bank from initiating bankruptcy procedures, the statement said.

The Central Bank also said Eurasia-Center's managers and shareholders failed to rectify the bank's financial position or eliminate the need for the Central Bank to revoke its license.

A temporary administration will be appointed to manage the bank's affairs until a bankruptcy procedure is initiated, the Central Bank statement said.

As the liquidity squeeze hits home, many domestic banks have struggled to cope with growing demand, while some have had to sell off assets to stay afloat.

Last month, billionaire Mikhail Prokhorov agreed to buy half of Renaissance Capital for $500 million, which analysts said was a bargain price.

Russian Railways and diamond monopoly Alrosa on Wednesday stepped in to buy jointly 90 percent of KIT Finance, three weeks after the investment bank defaulted on its debt obligations.

A woman who answered the phone at Eurasia-Center's office on Friday and only gave her name and patronymic as Marina Vladimirovna confirmed that Eurasia-Center had indeed received a directive from the Central Bank.

"Everything is in a state of flux at the moment," she said. "Our bank is being run by special administrators from the Central Bank."

A spokesman for the Central Bank, who declined to give his name citing the bank's policy, said the revocation of Eurasia-Center's license was not a signal to other commercial banks that the Central Bank would go after them.

"This is a situation where we have rigorously investigated the affected bank before making a final decision," he said.

He said Eurasia-Center clients should not panic, because the bank insured its depositors against losses, including in case of bankruptcy.

Eurasia-Center, a Moscow-based commercial bank, was established in 1994 and is part of the Roscontract Financial Group, whose interests include textiles, equipment building and finance.

Interfax rated the bank 278 in the list of the biggest Russian banks by assets published at the end of the first half of 2008.