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. Last Updated: 07/27/2016

Depositors Still Left in the Cold

MTDepositors picketing outside the Central Bank on Thursday morning.
Few personify the country's turbulent banking history as well as Nikolai Plotnikov, a 74-year-old retired physics teacher who joined a crowd of angry protesters in front of the Central Bank on Thursday morning.

Leaning on his cane as a light drizzle pattered down on a crowd of 50 people, Plotnikov recounted how he lost his savings in three successive bank crises, starting with the 1992 devaluation of the ruble, then in the 1998 default -- and finally in the Sodbiznesbank affair last year.

"We live in a state of theft," he said.

One year after the Central Bank recalled the license of Sodbiznesbank, the banking "mini-crisis" is still not over for the bank's 6,000 former customers who are waiting for their deposits to be refunded in full. Thousands more who held savings in a half-dozen other failed banks are in a similar situation.

Although only a fraction of the capital's residents lost money during the summer crisis, those who did have fought an uphill battle for restitution.

Private clients with Sodbiznesbank have recovered just 60 percent of their money, while those with Dialog-Optim, another bank that lost its license, saw just 26 percent, according to representatives of depositors.

Some saved for their children's education; others dreamed of moving into bigger apartments. At least nine Sodbiznesbank depositors have died in the past 12 months without collecting their money.

Meanwhile, corporate depositors -- mostly small businesses with just a few employees each -- have not seen a kopek.

The Central Bank recalled the bank's license on May 12, 2004, accusing it of padding its books with fictitious capital and processing ransom cash. The recall sparked a standoff with the bank's management, which blocked access to its offices on Krasnaya Presnya for two weeks.

Banking experts suspect that in that time, the bank managed to spirit away several billion rubles in assets -- an amount that would easily have covered the 2.23 billion rubles of deposits the bank held.

The revocation of other licenses soon followed. Within a month, banks started cutting each other's credit lines, newspapers published "black lists" of impending recalls and panicked depositors pumped ATM machines dry.

The government rushed to prevent further escalation by cutting reserve requirements -- thus giving banks more cash -- and by promising that all depositors would get back their cash.

Although the crisis fizzled out fast, depositors have sill not been fully reimbursed.

The Central Bank "should have secured the bank's assets first instead of shouting from the rooftops and grandstanding," said Roman Konikov, 82, a feisty World War II veteran who joined the demonstration outside the Central Bank, hoping to recover 60,000 rubles ($2,200) still unpaid.

Many experts agree with Konikov, but the Central Bank has said it never expected Sodbiznesbank's management would "enter the realm of criminality."

The authorities now say they are reimbursing depositors as fast as they can cash in on Sodbiznesbank assets, like its accounts at other banks.

But since most assets have been whisked away, the money is coming in a trickle. The last payment, in March, amounted to just 7 percent of deposits.

"When we raise any cash, we try to pass it right on to depositors," said Natalia Batayeva, who represents the Central Bank-appointed liquidator.

The liquidator could ask the courts to find the bank bankrupt. But for a court to declare a bank bankrupt, the liquidator needs evidence that the assets cannot be raised. "We are collecting such evidence," said Batayeva.

According to a special law rushed through the State Duma during the crisis, the Central Bank is responsible for reimbursing up to 100,000 rubles ($3,500) per account to depositors of banks whose licenses were recalled and then went bust. That is cold comfort to some 40 percent of private Sodbiznesbank clients who each had over 300,000 rubles on their accounts, said Dmitry Slinko, who co-heads a group of former Sodbiznesbank depositors.

Even Sodbiznesbank's bankruptcy would not necessarily put a cap on the restitution process.

Dialog-Optim was declared bankrupt in September, but its 8,500 private and corporate depositors are still waiting for some 3.3 billion rubles, according to Marina Prozorova, who represents them.

"The whole process is quite non-transparent: [The Central Bank] doesn't tell us anything, and we have no way of knowing what kind of assets the bank has left," she said.

Corporate depositors, who are next in line after individual clients for reimbursement, "don't stand a chance," said Slinko.

Depositors and banking experts alike are puzzled why Sodbiznesbank has not gone bust. "The size of the default is quite enough to declare that bank bankrupt," said Vyacheslav Khorovsky, a banking consultant at Lovells law firm. "Their best proof is the crowds of angry depositors."

Thursday's meeting in front of the Central Bank resembled a wake more than a demonstration.

The mostly elderly depositors shivered under the rain and strained to hear the faint loudspeaker.

Valentina Tizhevskaya, a 69-year-old retired professor, said she had hoped to spare her family expenses for her funeral but was still owed 8,000 rubles.


MT

Yelena Bakina

Yelena Bakina's daughter graduated from high school the same month as Sodbiznesbank went into receivership. Bakina, 38, saw the savings for her daughter's education vanish. "I found myself having to gather money from friends and getting into a lot of debt," she said.

People like Bakina are likely to transfer their cash to foreign or state-backed banks -- or take them out of the system altogether.

After swelling by a third in 2002 and again in 2003, the growth of deposits slowed down in 2004. Private deposits amount to just 11 percent of GDP in Russia, just a quarter of the number in countries like Poland or the Czech Republic.

According to Central Bank numbers, Russians might have squirreled away between $25 billion and $50 billion in so-called "mattress" cash, with another $200 billion stashed abroad.

Last year, the Duma finally passed a mandatory deposit insurance bill, which guarantees savings up to 100,000 rubles per account.

Officials suggested that depositors would be able to insure unlimited savings by "spreading" their money among various accounts.

Polls, however, have shown that many people have not even heard of the insurance scheme.

For depositor Plotnikov, it is too little, too late.

He claimed he had lost roughly $40,000 in today's money when in 1992 the government liberalized prices and froze Sberbank accounts, sparking inflation that wiped out most people's savings.

Plotnikov has since received just 1,000 rubles -- and the Finance Ministry estimates the government still owes its citizens some 11 trillion rubles ($400 billion) from the 1992 devaluation.

Plotnikov said he then became a victim of the SBS-Agro default in 1998, before transferring his cash to Sodbiznesbank.

"I'm convinced it's not a matter of simple mistakes -- they really are out to get us," he said.