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. Last Updated: 07/27/2016

Audit: Central Bank Lost $1Bln in '98

The 1998 audit of the Central Bank has revealed that the bank lost more than $1 billion last year and that some trading profits from the treasury bill market were not forwarded to the federal budget as required.

The Central Bank's performance as revealed in the audit - carried out by PricewaterhouseCoopers - has been criticized by some State Duma deputies, who said that the lower house of parliament was likely to censure the bank over the report.

"This audit records losses of 27 billion rubles for 1998 and no lower chamber is going to approve such a report," said independent Duma Deputy Nikolai Gonchar, a member of the chamber's budget committee.

The audit, a copy of which has been obtained by The Moscow Times, is accompanied by a list of comments from the auditor to the Duma that criticizes several Central Bank procedures.

The Central Bank's use of its own pension fund to invest in the treasury bill, or GKO, market is singled out for special attention. The Central Bank has been topping up its pension fund for bank employees through "miscellaneous bank expenses" since 1996, according to the audit.

This action was well within the law, as was the use of the money in the pension fund to buy up GKOs.

However, the profits from these activities were channeled directly through the pension fund, rather than being recorded as Central Bank income, bypassing the requirement for 50 percent of Central Bank profits to be transferred to the federal budget, PricewaterhouseCoopers states in the explanatory notes it sent to the Duma with the report. The report states that 441 million rubles in income generated through the pension fund went directly back to the fund.

Much of the recent interest concerning the Central Bank audit has centered on the Jersey-based Financial Management Co., or FIMACO, which politicians and prosecutors have alleged was illegally used to channel Russia's hard currency reserves into the T-bill market and elsewhere.

The fund has faced a barrage of criticism from U.S. congressmen concerned that IMF money was misappropriated through FIMACO. Allegations that the Central Bank churned hard currency reserves through FIMACO for insider trading on the GKO market could, if proved true, sink the entire bailout package, sources close to international lending agencies have said.

The Central Bank has ordered PricewaterhouseCoopers to carry out a separate audit of FIMACO, and a draft version of the audit has already been forwarded to the IMF, but not to the Duma.

That audit was expected to be completed in May, but the final version of the audit is not likely to be finished until next week, said a spokesman for PricewaterhouseCoopers.

Duma Deputy Gonchar, a well-known critic of the Central Bank, has said he may send a letter to IMF chief Michel Camdessus to demand a copy of the audit.

"It's totally out of order that the IMF should get priority over the Duma which is legally meant to examine all Central Bank activity," he said.