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. Last Updated: 07/27/2016

DialogBank Officials Ponder Throwing In the Towel

DialogBank officials, who have been struggling to save the bank after the government's default on treasury bills, are considering giving up after getting no support from the authorities.

DialogBank, which held about 40 percent of its assets in treasury bills, was counting on favorable terms for its restructuring as well as on a viable government bank restructuring program to help it get back on its feet.

However, the bank's own restructuring plan, which was approved by the now-departed management of the Central Bank in the fall of 1998, was axed by the tax authorities after the Central Bank bailed out of the deal under its new boss, Viktor Gerashchenko. The government has not yet come up with any concrete scheme of its own.

Unlike most Russian banks that went under, Dialog has struggled to maintain its image of a client-friendly, Western-style institution, claiming to have settled its liabilities - some $60 million when the T-bill market collapsed last August - to 22,000 private depositors and almost all of its $74 million debt to corporate clients.

However, the business climate in Russia put the bank's further activities in question, President Boris Lipiainen said Monday.

The bank has liquidated most of its assets, closing down all of its Moscow offices apart from the head office and firing all but a handful of staff.

"The bank in essence has been in a frozen state since November 1998," Lipiainen said.

Reports over the weekend said DialogBank was in talks with a European bank to sell off its infrastructure. However, Lipiainen could not confirm or deny those reports Monday.

The legal environment in Russia gives a heavily indebted institution little hope of recovering, with loopholes allowing unscrupulous officials to take away the bank's assets for next to nothing, he said.

"In the situation of such lawlessness, no one feels like undertaking something," Lipiainen said.

The bank's Russian and foreign shareholders have yet to decide whether the bank will remain open, but the decision is not likely to be made until after the presidential elections in 2000, DialogBank chief executive Peter Derby said.