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. Last Updated: 07/27/2016

INSIDE FINANCE: Was Inkombank the Reliable Bank We Put Our Trust In?




Where are the veritable values? Ten years ago we were told that they existed but what were they?


I am recollecting a TV advertisement of Inkombank with that slogan and a beautiful girl. Now the Moscow Arbitration Court has been holding Inkombank bankruptcy hearings since October, when the Central Bank recalled its banking license. The most active investors already started searching for "veritable values" in their bank accounts and in the bank's subsidiaries, hoping to get back something.


Until recently, Inkombank had been considered one of the most reliable Russian banks. Vast corporations like Gazprom, Trasneft, Rosvooruzheniye all trusted it. Inkombank was one of the first to get access to foreign credits. Its share derivatives were circulating on U.S. stock exchanges.


The bank was ranked second, after Sberbank, in terms of depositors. Ten years ago Vladimir Vinogradov, with several of his comrades, registered the bank as one of the first in Russia private banks. Its growth depended most on its main clients - industrial enterprises and commercial companies.


I do not know exactly for what reasons, maybe simply because of his difficult character and an incapacity to choose protectors, but Vinogradov, regardless of the size of his bank's assets, never became a real oligarch.


Concerning the banking business, Inkombank's leadership did not steer a steady course. In 1995, they built up many non-performing loans to industrial enterprises. Sometimes the amount of overdue debt exceeded 20 percent of the bank's assets. During that year's August banking crisis, they lost money in bankrupt banks. After that Inkombank became famous for being a system-forming bank - the Central Bank gave it credits to revive this vital entity.


In 1997 Inkombank was buying treasury bills - the infamous GKOs - and Russian Eurobonds, as well as gambling on the forward contracts market. None of the new losses were mortal for the bank.


But on Aug. 18, 1998, near the bank's branches in Moscow you could see the lines of those who wished to immediately withdraw they money. I can understand that.


The refusal of the government to pay back money dismayed everybody. Even those who put their money on one-year term deposits were demanding their cash back immediately.


There were lines at other banks too. SBS-Agro just closed all their branches and turned off the electricity supply to their ATMs. Meanwhile, Inkombank was paying out money till it could do so no longer.


The Central Bank installed temporary administration at Inkombank.


At a secret meeting between Inkombank President Vinogradov and the bank's chairman, Vladimir Groshev, the pair decided to spurn the hand extended to help them, turning away the Central Bank and using legal methods that they picked out of the SBS-Agro hand book - using a distant district court to have canceled the Central Bank order introducing the temporary administration.


But even the participants of the secret meeting quickly understood that the problem could not resolve itself.


Bankers considered that the situation might be stabilized and with the support of the Central Bank, repayments to investors could be organized.


But at the Central Bank no one was ready to talk. All that Central Bank chairman Viktor Gerashchenko and deputy chief Tatyana Paramonova could manage to do was halt the bank's operations by recalling the banking license and putting the responsibility for resolving the issue with the arbitration court.


The Central Bank was in such hurry in recalling the bank's license that it was not even possible to compile the registers of depositors to allow for the transfer of deposits to Sberbank under the government scheme to help citizens whose money had ben trapped in collapsed banks.


What then? The Central Bank insists on bankruptcy. According to the present laws bankruptcy cases regarding financial institutions fall under the competence of the Central Bank, so that seems to be that.


It is not clear why SBS-Agro, which ignored investors' and depositors' claims, is getting more and more stabilization credits. Let competent people figure that one out.


Yet despite everything, Inkombank still portrays some semblance of life. Current revenues from active assets even allow for some profit.


So did it actually have some veritable values on its books then?


Irina Yasina was a Central Bank spokeswoman under former Central Bank Chairman Sergei Dubinin.