Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Auditors: Central Bank's Books a Mess

A Western accounting firm concluded that it could not reconcile the books of the Russian Central Bank because of errors, possible fraud, incomplete records and delays in Russia's antiquated banking system.

The accounting firm Coopers & Lybrand, in a financial analysis of the Russian Central Bank accounts presented to parliament Friday, praised the bank for improving its accounting but said much information on profits and losses was still missing.

"Some misstatement may have occurred in certain account balances which may result from error, or possible fraud, connected with the very significant level of uncleared balances both within Russia and between the States of the CIS, both in rubles and hard currency", the report said.

Meanwhile, in a report also submitted to parliament, Russian Prosecutor General Valentin Stepankov lashed into the country's banking system, saying it is riddled with corruption, embezzlement and theft, Itar-Tass reported.

He said the Central Bank has failed to monitor the country's commercial banks and to ensure that enterprises repaid state credits. Stepankov also charged that Central Bank employees have assisted in the theft of 300 billion rubles ($287 million) from the commercial banks.

Four Central Bank officials are under investigation for allegedly taking bribes.

Some members of parliament claimed Friday that trillions of rubles were unaccounted for in the bank's 1992 balance sheet. Vladimir Rebrikov, a conservative member of parliament, said his own calculations showed that 2 trillion rubles were unaccounted for, while a second deputy said as much as 10 trillion was missing.

But Central Bank Chairman Viktor Gerashchenko rejected the charges and challenged Rebrikov to offer proof, offering to resign if the accusations were substantiated.

Alexander Pochinok, the centrist chairman of the parliament's budget committee, dismissed the charges as the "double counting" of expenses. Parliament accepted the bank's 1992 balance sheet with an 86-0 vote.

Coopers & Lybrand had been hired by parliament to give an independent financial analysis of the 1992 accounts of the Central Bank. In its summary report, the firm said that the Central Bank had properly compiled the information but that the problem resulted from lack of adequate data from the regional clearing centers.

Jeremy Foster, partner of Coopers & Lybrand in Moscow, said in an interview that many of these payments had been clogged up in regional clearing centers, making it difficult for the Central Bank to properly account for its assets and liabilities.

"We have not received sufficient information in order to satisfy ourselves that the summary profit-and-loss account reflects all income and expense transactions", the report said.

The report stated that the bank's accounting practice appeared to be in line with existing Russian regulations, but added that because of the scope of its analysis and "the lack of sufficiently detailed information, we may not have identified all areas where delays and errors have occurred in the processing of accounting information".

Foster said his accounting firm had not set out to do a full audit of the bank but had been hired to do a more limited financial analysis, because it was clear that Russian accounting practices were not up to world standards.

Gerashchenko said in parliament that the audit had largely approved the balance sheet but said he hoped to continue improving accounting standards at the bank with the help of the World Bank.

A World Bank delegation will arrive in Moscow later this month to start helping the Central Bank improve its accounting, payment system and financial infrastructure, said Charles Blitzer, chief economist for the World Bank in Moscow.