7 Nov 2018 13:25

Central Bank revokes license of U.S. sanctioned Agrosoyuz Bank - CBR statement

TOMSK. Nov 7 (Interfax) - The Russian Central Bank has revoked the banking license of Moscow-based Agrosoyuz bank, which is subject to U.S. North Korean sanctions, the regulator said in a statement.

The license was revoked on November 7.

"Household funds were the main source of funding of asset-side operations by LLC CB Agrosoyuz (over 70% of liabilities). Risk appetite of the bank caused a large amount of impaired assets to accumulate on its balance sheet," the statement said.

Over the course of this year the supervisor repeatedly revealed an underestimation of credit risk by the bank and required Agrosoyuz to make additional loan loss provisions. However, the credit institution conducted 'scheme' operations, involving its owners, intended to artificially sustain the equity capital to create the appearance of formal compliance with prudential regulations.

"In particular, to avoid grounds for regulatory measures to prevent bankruptcy of the credit institution its sole member provided it financial assistance nine times in 2018 for a total amount of 750 million rubles. Every time funds were deposited with the bank by a third party by proxy from the bank's member," the Central Bank said.

The sources of the funds to provide financial assistance were opaque for the supervisor, the regulator said.

In the course of the current inspection the Central Bank established the fact that the tills of LLC CB Agrosoyuz lacked a large amount of cash exceeding 1.3 billion rubles, which is comparable with the bank's equity capital. Meanwhile, the bank submitted false documents to the supervisor to conceal its real financial standing and obstructed the Central Bank's inspection.

Agrosoyuz is a member of the deposit insurance system.

Agrosoyuz was the 192nd biggest Russian bank by assets at the end of the third quarter of 2018 according to the Interfax-100 ranking complied by the Center for Economic Analysis. According to the Russian Central Bank, the bank was 198th by assets as of October 1, 2018.