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. Last Updated: 07/27/2016

Bank Pioneer Halts Financial Operations

Bank Pioneer, a medium-sized Russian bank, said Tuesday that it was suspending operations and had decided to enter temporary administration.

The bank said the decision was taken on the initiative of its U.S. parent, investment company Pioneer Group Inc. It said the stability of the group's Russian operations would not be affected by the move.

Bank Pioneer said in a statement that its chairman had resigned, and its board decided to suspend all financial transactions until an investigation into the activities of the former management was completed.

The statement quoted new bank chairman Mikhail Chebotaryov as saying the board of directors had suspended the bank's operations, based on claims and demands by creditors and after a full estimate of alleged administrative and financial irregularities by Bank Pioneer's former management.

A Bank Pioneer spokesman said the board was now meeting to discuss, among other things, the question of who should comprise the temporary administration.

Pioneer financial investment group also includes Pioneer Securities and Pioneer Pervy investment funds.

"We should mention that the situation around Bank Pioneer in no way concerns existing liabilities of the Pioneer group's investment funds and will have no impact on the stability of their activities in Russia," the statement said.

Bank Pioneer was set up in 1994 and its assets were $48 million on Jan. 1, 1998. At the end of April 1998, affiliates of U.S. Pioneer Group Inc. owned 80 percent of the bank.

Estonia's Forekspank has said recently it abandoned plans to buy a 35 percent stake in Bank Pioneer after signing an agreement to that affect in February.

Forekspank said at the time that the financial condition of the Russian bank differed substantially from the results of an audit conducted in November.

"As a result of two months of work, a Forekspank team discovered a number of hidden deals at Pioneer Bank, which had been carried out by the bank's leadership," Raivo Erik, former manager of the Pioneer Bank project at Forekspank, had said.

Erik said if the loss due to these deals is correctly reflected in the bank's balance sheet, it will be impossible for the bank to continue normal business.

Under these circumstances, Forekspank no longer saw purchase of a holding in Pioneer Bank as expedient and terminated the project, the bank said in a statement.