Nabiullina's vacuum cleaner: Russia may have less than 500 banks by the end of 2017

The Central Bank revoked the license from the Moscow "Riabank". In total, over the past four years, 362 banks have lost their licenses.
18.08.2017
Forbes
Origin source
The Central Bank of Russia, by its order, on July 17, 2017, revoked a license to conduct banking operations with the Moscow commercial bank "Russian Investment Alliance" ("Riabank"). If the regulator continues to deprive Russian banks of licenses at the same rate as in the first seven months of this year, by the end of 2017 there may be less than 500 banks in Russia.

"Riabank" had an ineffective system of risk management and internal control, which led to the appearance of a significant volume of low-quality assets, "the press service of the Bank of Russia said on August 17. A proper assessment of credit risk and an objective reflection of the value of assets in the bank's accounts revealed a complete loss of the credit institution's own funds. At the same time, her business model was not focused on rendering traditional banking services. Instead, the bank was involved in the implementation of questionable transactions related to the cashing and withdrawal of funds abroad.

The regulator applied three times to "Riabank" measures of supervisory response, imposing restrictions on attracting deposits from the population. But the bank's managers and owners did not take measures to normalize its activities. In the circumstances, the Central Bank decided to deprive the bank of a license. Temporary administration is assigned to Riabank. Powers of executive bodies of the credit organization are suspended.

In terms of assets as of August 1, 2017, "Riabank" held 334 place in the banking system of Russia. The credit organization is a participant of the deposit insurance system. This means that depositors of the bank can expect to receive insurance compensation in the amount of 100% of the balance of funds (but not more than 1.4 million rubles in aggregate per one depositor).

With the large ones finished, with the small ones - no

Since the beginning of the year, licenses for banking activities have been withdrawn from 43 Russian banks, according to information on the regulator's website. Including the four - in August 2017. All of them were not among the 400 largest Russian banks.

The last large bank, from which the Central Bank revoked the license, was Yugra Bank, which ranked 29th in terms of assets in the country's banking system. The extreme measure of impact was applied to the credit organization, the main owner of which is billionaire Alexei Khotin, July 28, 2017.

Immediately after that - on August 2 - the first deputy chairman of the Central Bank Dmitry Tulin commented on the possibility of new revisions of licenses from credit institutions. He said that the process of improving the Russian banking sector is still ongoing. But he stressed that in the foreseeable future, the Central Bank is not expected to revoke licenses from large, significant banks.

With regard to the revocation of the license from small banks that do not fulfill, in its terminology, the "socially significant function of financial intermediaries in the economy," was not so categorical. "Weak banks have survived, but - using medical terminology - their illnesses are diagnosed, and we, together with their owners, carry out the necessary treatment," Tulin said. And he expressed confidence that this treatment will be effective, thanks to the use of a new mechanism for financial recovery through additional investments in the capital of weakened banks. "The preservation of savings will be ensured, and strengthened banks will have the opportunity to increase lending to the economy," the first deputy chairman of the Central Bank of Russia said. Already after that, licenses were withdrawn from three smaller banks.

Statistics by Nabiullina

The total number of banks with a license as of August 17, 2017 was 533. If the process of depriving banks of licenses continues with an average rate for the current year, by January 1, 2018, they may remain in the country less than 500 (on January 1, 2017, there were 575 in Russia ).

Seven years ago, the number of Russian banks with a banking license exceeded the 1,000 mark (as of January 1, 2010, there were 1007 of them). On June 24, 2013, the post of the Chairman of the Bank of Russia was taken by Elvira Nabiullina. By that time in Russia, banking activities were carried out by 894 banks. If in the first six months of 2013 licenses were lost by three banks. That half a year after Nabiullina's arrival in the Central Bank - 35. In 2014, licenses were withdrawn from 76 banks. In 2015, there are 102 banks. In 2016, it was at 106.

In just four years of Nabiullina's management, thus, 362 banks were deprived of licenses (without taking into account non-bank credit institutions).

In April 2017, the head of the Central Bank Nabiullina said in her speech to the Forbes club that the regulator is not against small banks and has never advocated that the number of banks should be reduced. But, she said, "the business model of small banks now can not compete with the business model of large" and small banks need a business model that will allow them to survive. "And not so their business model is based on high deposit rates, when they" vacuum "the deposits of the population, and then invest in risky projects, because you have to repel those rates. And in the worst case - they are engaged in the withdrawal of assets, "Nabiullina explained. "Unfortunately, this is not a rare practice," she admitted.