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. Last Updated: 07/27/2016

Handicapped ARKO Forges Ahead on Bank Revamp




After languishing for almost five months on the drawing board, the agency charged with reviving Russia's ailing banking sector has adopted an operational mandate and plans to start restructuring banks later this month, officials said Friday.


Analysts said, however, that ARKO, or the Agency to Restructure Credit Organizations, is unlikely to make effective inroads into saving the banks devastated by August's economic meltdown.


Armed with a plan approved by the ARKO board of directors two weeks ago, teams of experts are now in Russia's regions determining which banks will be rescued, spokesman Alexander Vosnesensky said Friday. Kemerovo and Kaliningrad have been prioritized in a list of regions that includes Yaroslavl, Voronezh, Primorye and Krasnoyarsk.


The board is expected to make a final decision on which banks will be targeted by the end of April, Vosnesensky said.


However, there is a catch to the bailouts. To qualify, a bank must voluntarily apply to the agency for aid and it must fit certain criteria. Most importantly, the bank must be authorized to handle more than 25 percent of the region's budgetary accounts. The bank also can not have debts in loans that take up more than 30 percent of its assets.


ARKO itself still faces problems disbursing loans, mainly its mere 10 billion rubles in operating capital and the lack of a law authorizing its activities.


But such details are not about to stop the agency.


"We are still waiting for a bill on the restructuring of credit organizations ... even if it is not passed we will continue," Vosnesensky said.


Kim Iskyan, a senior equity analyst at MFK Renaissance, said that insufficient funds combined with an absence of real political will to enforce restructuring would continue to hamper the project.


"A lot of people stand to lose money through restructuring and through enforcing bankruptcy procedures," he said, adding that this has caused parliament to stall on the restructuring bill.


The agency, set up in November to rescue Russia's banks wreaked by the August financial crisis, has been hamstrung from the start by a lack of funds.


Although established to scoop up the rundown assets of banks nearing meltdown and liquidate bankrupt institutions, the agency appears to be far removed from its original mandate.


"With a founding capital of only 10 billion rubles, the agency will be unable to tackle major Moscow banking institutes," Vosnesensky said. "To restructure just one of these banks would soak up our entire founding capital and leave the rest of Russia's banks out in the cold."