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. Last Updated: 07/27/2016

Depositors Warned Their Savings Are Lost

Depositors in Rossiisky Kredit and Inkombank may never see their money because of looming bankruptcy proceedings, a consumer group said Tuesday.

The government arranged the transfer of accounts from seven of Russia's distressed banks to state-owned Sberbank as a means of protecting individual depositors. Ruble accounts were to be paid out in full and hard currency accounts in rubles at an exchange rate of 9.3 to the dollar.

But the Russian Consumer Rights Advocacy Group, or KONFOP, believes that the transfer is unlikely to bring any money soon to the private depositors in Inkombank or Rossiisky Kredit bank.

Inkombank, SBS-Agro, Menatep, Mosbiznesbank, MOST-Bank, Promstroibank and Uneximbank signed transfer agreements in September while Rossiisky Kredit joined them in November.

About 60 percent of all depositors in the first six banks transferred their accounts to Sberbank by the end of September, according to the Central Bank. Rossiisky Kredit said that 47 percent of hard currency accounts and 85 percent of ruble accounts would be transferred to Sberbank.

Since December, Sberbank has been paying out depositors in Menatep, Mosbiznesbank, MOST-Bank, Promstroibank and Uneximbank.

But payments have still not begun at three of the banks - Inkombank, Rossiisky Kredit and SBS-Agro.

The problem at SBS-Agro is technical and KONFOP hopes it can be resolved. Sberbank and SBS-Agro say there is disagreement over how to transfer SBS-Agro accounts, which are usually split between principle accounts and credit-card accounts. This could be an excuse to gain time but one grounds for hope is that the Central Bank has said it will ensure SBS-Agro's survival in some form.

But neither Inkombank or Rossiisky Kredit is likely to get a state bailout and Sergei Trukhachov, deputy president of KONFOP, said that the banks' depositors could lose virtually everything.

Sberbank says it is not paying Inkombank depositors because the bank has not honored part of the transfer agreement requiring it to hand over all its reserves funds lodged with the Central Bank (2.214 billion rubles on Sept. 1).

The transfer is now legally problematic as Inkombank is now facing bankruptcy. The Central Bank dropped a temporary administration it briefly imposed and Inkombank's former president Vladimir Vinogradov also quit the bank. There is only a court administration with limited power.

Trukhachov said that confusion caused by the bankruptcy proceedings now facing Inkombank might postpone the transfer of reserve funds indefinitely.

The bankruptcy case was filed by a society for protection of Inkombank clients' rights in November after Inkombank's license was revoked Oct. 29.

If a court hearing Jan. 28 declares Inkombank bankrupt, a liquidation commission will be appointed. While depositors are first in line to be repaid under Russian law, the liquidation could take months.

This will erode the value of ruble deposits and also of hard currency, which must be repaid in rubles at 16 rubles to the dollar, the exchange rate on the date Inkombank's license was revoked.

KONFOP believes that Rossiisky Kredit bank's license may be also be withdrawn soon and bankruptcy proceedings started. This would make its situation similar to Inkombank's.

"But if it is not, then individual depositors must file suits with courts and the situation will be similar to SBS-Agro's, which slowly pays off to its clients in response to court executors," Trukhachov said.

He said one court has already issued about 4,000 writs to individuals, but Rossiisky Kredit refused to pay most of them.

Tatyana Ismailova, a Rossiisky Kredit spokesperson, said that she believes that Sberbank will start paying off the deposits in March or April.