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. Last Updated: 07/27/2016

Everything Must Go: Bank Glumly Liquidates

The engraved metal sign bearing the bank's name still sparkles in the sun. Security guards mill about the entrance, creating an impression of financial activity within. But it's all an illusion.


Inside, the general manager sits at a desk, glumly signing letters to clients as part of the process of liquidating the bank -- from its Garden Ring office building right down to the fish tank in the corridor.


So it goes at just one of more than 150 commercial banks to lose their licenses so far this year -- and more than 450 since an interbank lending crisis last August exposed huge fissures in Russia's fledgling private banking system.


Like many of its brethren, this bank tried to soar high when rampant inflation made ruble speculation the name of the game. The inevitable landing was hard, and the lessons learned were too late.


The manager of the bank asked not to give his name or the bank's but he did recently place an advertisement in The Moscow Times, under the mournful title "Bank Liquidation."


It announced the sale of the baubles of affluence that were amassed in better times, including a "90 percent renovated" 17th-18th century mansion on a site in the Taganka area.


"Our problems started a year and a half ago, but we thought we would be able to solve them," said the manager.


"We stepped on a rake even before everyone considered the 'currency corridor' a horrible banking crisis," he said, referring to the imposition last summer of a ruble trading band that eliminated the opportunity for huge profits from hard-currency speculation.


Stripped of its license by the Central Bank on May 15, the bank's only remaining business is the selling of assets to try to meet obligations to staff, tax collectors and creditors.


"I should have been buying furniture and equipment, while now I'm actually selling it," said the manager.


Most banks being closed are small- and medium-size institutions for whom the country's financial stabilization was a mortal blow. At its peak Russia had more than 2,500 banks -- a good 1,500 too many, in the judgment of some experts.


This bank was typical of many that have been closed, said. Then in May came an abrupt letter revoking its license.


"Our board of directors was neither informed nor invited for a discussion. We just received a message," he said.


A Central Bank spokesman Monday would not comment specifically on this bank's situation, but said a decision to revoke the license of a commercial bank would be based on considerations of protecting customers.


"We act only when the activities of a bank imperil its creditors and depositors," said Alexei Sitnin, head of the Central Bank's press center.


Though license revocation seems to be final -- Sitnin said so far not one has been reversed -- the action often leaves a bank in limbo. Because there is no Russian bankruptcy legislation specifically dealing with banks, it is difficult to enforce liquidation without cooperation of a failed bank's owners, he said.


"Out of 450 banks that have been stripped of their license only six have been liquidated," Sitnin said.


The bank manager was under no illusions that his institution had a future. "After the Central Bank decides to revoke a license there is no hope to reanimate the bank," he said, explaining that the Central Bank blocked the bank's accounts and created a special fund for proceeds from the liquidation sale.


The bank's main building near Taganskaya is being offered at $3.5 million, according to The Moscow Times advertisement. The package includes telephones, alarm systems, office equipment, weapons and security storage and a subsidized 49-year lease from the Moscow city administration.