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. Last Updated: 07/27/2016

Nuclear Ministry Wants To Retake Konversbank

Still smarting from a series of legal defeats that ceded control of its pocket bank, Konversbank, to MDM, the Nuclear Power Ministry on Tuesday took the unusual step of appointing a shadow CEO, board of directors and chief accountant -- and petitioned the Central Bank to let it retake the helm.

The ministry, which once owned or controlled more than 75 percent of Konversbank and channeled an estimated $500 million a year through it, has seen its ownership in the bank shrink from 75 percent to what is believed to be less than 25 percent over the last year.

The beneficiary has been MDM Bank, which last year snapped up, through affiliated companies, 44 percent of the bank, including 19.2 percent and 6.18 percent stakes from Nuclear Power Ministry "subsidiaries" Tekhsnabexport and Rosenergoatom, respectively.

According to Interfax Ratings Agency, as of Oct. 1, MDM is the 12th-largest bank in Russia with assets of $1.15 billion and Konversbank is No. 25 with nearly half a billion dollars in assets.

Through an additional share emission last year, Konversbank's eighth, MDM picked up another 25 percent of the bank for 1 billion rubles (about $40 million that time). An Aug. 31 shareholders meeting that followed the share emission confirmed MDM board chairman Andrei Melnichenko CEO of Konversbank. Other MDM representatives were elected to the board and the Central Bank approved all of their appointments.

Melnichenko, backed by then-Nuclear Power Minister Yevgeny Adamov, was appointed Konversbank CEO in December 2000, and the share emission that gave him complete control of Konversbank began before Adamov was fired by President Vladimir Putin in March. His replacement, current Nuclear Power Minister Alexander Rumyantsev, opposed the deal and asked the Central Bank to annul it, which it did a few weeks ago.

Since the Aug. 31 board meeting that confirmed Melnichenko, the ministry has been using every legal possibility to stop MDM from gaining further control of Konversbank, including holding alternative shareholders meetings. But each time MDM has emerged victorious.

However, the recent annulment of last year's emission and the results of a recent inspection of Konversbank by the Central Bank, which found assets being moved to MDM, seems to have given the ministry new hope.

The inspection found multiple violations in transactions between MDM and Konversbank last year, including the transfer of Konversbank's $9 million headquarters on Kotelnicheskaya Naberezhnaya to the balance sheet of MDM.

Despite the finding and recent moves by the Nuclear Power Ministry, a spokesman for MDM said the bank was not worried. The ministry declined to comment, and Konversbank has not had a press service since its takeover. (MT, Vedomosti)