In 2015 one of the key events on the bank accommodations market was the revocation of Probusinessbank’s license by the order of Bank of Russia № OD-2071 from 12.08.2015. According to press-release of the Central Bank of Russia, noncompliance with the capital adequacy standards served as a formal reason for revocation of license. Noncompliance resulted in decrease in own funds lower than minimum value of authorized capital, which was set on the date of credit organizations state registration. This, in turn, was a result of high-risk activity, connected with placement of funds in low-quality assets, that led to full loss of own funds by the bank.
The results of further proceeding of the Central Bank, published in mass media, showed, that on the date of license revocation, the assets value including reserves amounted to 146,8 bln RUB, liabilities value amounted to 148,1 bln RUB. Meanwhile, the property with the value of 61.5 bln RUB (almost 42% of all assets) was purchased and stored under contracts with non-residents. The property consists of securities of Atlas Investment Solutions (Luxembourg), the warrants1 of Mediobanka International S. A., securities in depositaries: Brokercreditservice (Cyprus) Ltd and Otkritie Capital International Ltd, monetary requirements for transactions with currency and securities to Ambika Investment Ltd and Dinosaur Merchant Bank Ltd (UK) and funds, placed in Falcon Private Bank Ltd.
Further it turned out, that securities of Atlas Investment Solutions and warrants of Mediobanka are not listed and not traded on the market and also have no rating. The rest of Probusinessbank’s funds on the accounts of Dinosaur Merchant Bank Ltd, Baltikums Bank AS, Lavuas Pasta Banka and Falcon Private Bank Ltd totaling about 6,3 bln RUB are not confirmed by extracts, besides, the activity of Falcon Private Bank Ltd turned out to be unprofitable. Ambika Investment Ltd is almost the only contractor for currency transactions on terms, which are quite different from the market. Herewith the deals took place in order to increase profits. Highly liquid assets on total sum of 28,3 bln RUB were placed in Brokercreditservice and Otkritie Capital International and the same depositories provided loans to Merianol and Ambika Investment Ltd on total sum of 25 bln RUB. These companies, in turn, didn’t fulfill the obligations to depositaries; as a result, the property was lost by Probusinessbank. The charge over securities was hidden from the Central Bank.
The funds (totaling about 3 bln RUB) of six borrowers, who had technical and economic relations with the bank, were placed on the operating account of the general contractor in Trast Komercbank (Riga). The debts of other companies to the bank amounted to 5,8 bln RUB.
Thus, the transfer of assets can indicate about the fact, that bank owners use their powers contrary to the legitimate interests of creditors and depositors.
Revealed scheme of the withdrawal of assets abroad served for the Central Bank as a substantial reason for the beginning of mass checks of securities portfolios of banks, which hold them in foreign depositories.
The placement of the securities in foreign depositories is not a violation of the law. However, according to experts, this allows to pledge securities and not to make a reserve for them. The Central Bank can’t receive data from foreign depository without appropriate permission and, therefore, has no information about the charges over securities. Such practice is quite widespread and many banks use it for project financing.
Last week deputy chairman of the Central Bank Vasily Pozdyshev during the meeting with bankers reported, that in 2016 the controller is going to make a request to the banks concerning cash flows, placed in foreign banks, in order to verify the correctness of the financial statements. The same procedure will be carried out in relation to securities in foreign depositories.
According to experts, the Central Bank may pay special attention to small and average private credit institutions, which use foreign banks and depositories to avoid the normative standards or withdraw funds in favor of shareholders. As a result, a new wave of revocation of licenses is possible.
According to the Central Bank data as of 1 October 2015, 767 active credit institutions and 1498 branches are registered in Russia. The subscription on Information and Analytical system Globas-i® will let to get acquainted with their activity, financial indicators and archival information concerning banks with revoked licenses.
1Warrant is a security paper, which give to the owner the right to buy a proportional number of shares at a specified price (as a rule, lower than the current market price) within a specified period of time
In the early October 2015, 12 countries of the Trans-Pacific region reached the Trans-Pacific partnership agreement. Initiative of the partnership creation belongs to Brunei, New Zealand, Singapore and Chile. Under the TPP* frameworks the USA, Australia, Canada, Japan, Malaysia, Mexico, Chile, Peru and Vietnam formed the economic union. The TPP is expected to operate after each of 12 countries will ratify the agreement, i.e. in or after 2016.
The TTP countries formed a kind of free trade zone in the South-Pacific. According to the agreements reached, the general policy for the intellectual property rights protection should be implemented, as well as the general policy for government procurements, export control, competitive policy and probably there will be agreement for currency issues.
There should be no customs fees between the partner countries. Also it is necessary to unify sanitary and phytosanitary measures and labor markets. Moreover, the agreement provides for settlement in environmental impact, internet trading and services trading. According to the analysts, several countries are easier to come to terms with each other, than to agree for reduction of trade barriers under the WTO*.
The experts considers the TTP as an alternative to ASEAN* and APEC* in the South-Pacific, because they are not aimed at promoting the America’s attention to Asia. The TPP formation could also be a barrier for the China policy in this region. The USA President explicitly stated about it in his speech for the Congress in April 2015. The USA also considers this partnership as a tool for strengthening their allies in the South-East at the confrontations with China.
Today China actively partakes in APEC format, SCO*, promotes the Silk Road project, RCEP*, supporting in implementation of economic interests. Despite some countries directly cooperate with China, there are difficulties with entering its domestic market and not every South-East country agrees with this state of affairs. That is why the question of China’s participation in the TPP is not arisen yet. On the other hand, the USA suggests equal in the TPP. However, Russia and China can be the members only with the approval of the United States because of their dominant position.
Today Russia’s leadership approaches the project in the context of assessment, because the partnership does not affect interests of the country in the trade on the South-East market. In its turn, Russia develops the EEU* project and has already stated the idea of connecting this project with the Chinese “Silk road economic belt” linked with the RCEP. By the Russian government, the TPP appearance is considered as backstage project and an intention of some countries to solve problems out of WTO, because negotiations on the partnership creation are conducted in secret from own nationals, business community, public and even other countries.
The decision concerning the TPP is considered by the foreign affairs experts as a first step to split of the region into economic blocs. That is why the position of negotiators relating to the TPP is a matter of concern, connected with the risk of world trade segmentation after the partnership creation. However, it does not prevent Russia to directly cooperate with Vietnam, New Zealand and other countries.
TPP – Trans-Pacific Partnership
WTO – World Trade Organization
ASEAN - Association of Southeast Asian Nations
APEC - Asia-Pacific Economic Cooperation
SCO - Shanghai Cooperation Organisation
RCEP - Regional Comprehensive Economic Partnership
EEU - Eurasian Economic Union.