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. Last Updated: 07/27/2016

Unexim, 3 Others Lose Bank Licenses




The Central Bank decided Tuesday to strip once mighty Uneximbank and three other major financial institutions of their operating licenses, a move reportedly taken at the urging of the International Monetary Fund.


The decision to cancel the licenses of Uneximbank, Mezhkombank, Promstroibank and Mosbiznesbank was made after an audit had found their finances wanting, Vladimir Goryunov, deputy chairman of the Central Bank, said following an extraordinary meeting of the Central Bank board of directors, Interfax reported.


The Central Bank announced the move after a top level Finance Ministry meeting with a delegation from the IMF, which along with the World Bank has been demanding that Russia close down several large banks that have been technically insolvent for months.


The IMF team arrived in Moscow on Monday for what Russia hopes will be a conclusive round of negotiations to ensure the IMF releases a crucial $4.5 billion bailout package.


Speaking after the end of a meeting between Russian and IMF officials, Deputy Finance Minister Oleg Vyugin said that the IMF team appreciated the decision to cancel the licenses.


As of last month, the Central Bank had revoked the licenses of only two major banks, Inkombank and Tokobank.


A move last month to revoke the license of former banking giant Menatep, along with the licenses of 11 other, lesser banks, coincided with the visit of a team of officials from the World Bank.


However, while the decision has apparently found favor with the IMF, moving against these particular banks at this time looks likely to unleash a storm of criticism and muddy the waters of the banking system even further.


Mosbiznesbank has been struggling and earlier this year announced it was merging with powerful Moscow banking giant Bank of Moscow. Officials from the two banks were unavailable for comment Tuesday.


The other three banks f Mezhkombank, Uneximbank and Promstroibank f were said to be making progress in striking restructuring deals. As a result, the announcement late Tuesday that these banks would lose their licenses stunned bank executives and drew criticism from industry analysts.


The foreign creditors of Mezhkombank have already howled in protest at the move to revoke the bank's license.


"I'm totally stunned by the Central Bank decision. All the banks international creditors had only just agreed to the banks restructuring. This was the first time any Russian bank had reached agreement with all creditors on restructuring and it had done so in a way that was completely transparent," said Dan Crebbs,the head of American Express' representative office in Moscow.


"We will fight this decision all the way," he said.


American Express is now the bank's second largest shareholder following Standard Bank, he said.


The biggest shock surrounded Promstroibank. Just hours before the Central Bank moved against the bank, the Agency for Reconstruction and Development, or ARKO, had announced it was willing to lend the bank 3.1 billion rubles ($128 million) to help it restructure its debts.


ARKO head Alexander Turbanov told reporters at a presentation Tuesday morning that Promstroibank would receive ARKO loans if its creditors would agree to a restructuring plan.


"One would think that ARKO should be working closely with the Central Bank on restructuring, but given the unhappy timing of today's announcement, it seems there is a wide communications gap between them," said Kim Iskyan, a banking analyst at MFK-Renaissance.


Officials at ARKO were unavailable for comment on the Central Bank decision.


Meanwhile, Uneximbank had also announced on Tuesday morning that it was making good progress in talks with foreign creditors owed some $2 billion.


Uneximbank cried foul at any decision to take away its license.


"Revoking Uneximbank's license will complicate the process of restructuring its debt and will bring significant losses to both creditors and shareholders. Such a decision will stamp on the rights of foreign creditors in particular," said Tatyana Ondoyeva, Uneximbank spokeswoman.


The Central Bank has piled pressure on Uneximbank in recent weeks to make more progress on a restructuring deal. Central Bank chief Viktor Gerashchenko said at an economic forum in St. Petersburg just two weeks ago that the Central Bank was considering steps to revoke Uneximbank's license.


In a sign that Uneximbank could feel the noose tightening, it released a public statement earlier last week, retorting that any move to remove its license would be prompted by a political witch hunt and would scupper any chances it had of finalizing restructuring negotiations with foreign creditors.


After nine months of almost no progress on negotiations with creditors, Uneximbank's advisor on restructuring, Fleming UCB, announced Monday the bank had agreed the basis for a restructuring deal with its foreign creditors.


Uneximbank had even managed to coax aggressive investment bank Lehman Brothers back on board.


Lehman Brothers had been the first Western financial institution to cry foul at Uneximbank's refusal to meet its obligations following the August crisis. It was the only Western bank to launch legal action against Uneximbank, winning from a London court the right to seize up to $20 million worth of Uneximbank's assets abroad.


However, Lehman Brothers decided to rejoin the steering committee of Western creditors at the beginning of this month because it considered Uneximbank was approaching the talks more constructively, Lehman Brothers spokesman John Godfrey said Tuesday in a telephone interview.