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Banking Woes in Russia Mount as Central Bank Pulls Probusinessbank License

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Published on : Aug 13, 2015

An increasing number of banks in Russia are feeling the adverse impacts of the country’s economic slump, which is further accelerated by the Central Bank’s decision announced on Wednesday to withdraw the license of the mid-sized Probusinessbank.

Vulnerability of the banks in Russia to the Western sanctions over Ukraine crisis and volatile oil prices have led to a steep economic contraction, leading banks’ assets to deteriorate. 

The financial crisis experienced by the Russia previous year has accelerated the need for the to reduce the number of banks operating in the country. These banks have already started registering round of bad loans – as told by Natalia Orlova, who is an economist at Alfa Bank. 

License of Probusinessbank has been already revoked by the central bank, since it failed to meet the minimum capital requirements. 

Central bank has also cited a reason that Probusinessbank had spearheaded a high-risk policy, and placed its monetary means in low-quality assets. Hence, as a result the bank had exhausted its capital. 

In the comments emailed to Reuters, the deputy chairman of the Russia central bank Mikhail Surkov said that the liabilities of the bank exceeded its assets by at least US$1.04 billion. The hole, according to Surkov, was drilled by the presence of banks with diverse financial assets that already showed signs of being fictitious.  He also said in the mail that the central bank also intended to inform the law enforcement agencies to investigate suspicions and to take necessary actions if the same is confirmed by documentary evidence. 

However, Probusinessbank managers did not respond to the central bank’s decision publicly. 

In terms of assets, the bank was 51st largest, which made it a relatively big player in a country with over 700 banks, but not one of them has systematic importance. The top 20 banks in Russia account for almost three quarters of the sector’s assets.