Russian Central Bank closes three more banks in crackdown

Russian Central Bank closes three more banks in crackdown

MOSCOW - Reuters
Russian Central Bank closes three more banks in crackdown

Women stand by the door of an office of Investbank in Moscow December 13, 2013. REUTERS Photo

Russia’s central bank said on Dec. 13 that it had withdrawn the licenses of three more banks in a crackdown on shady financial activities a day after President Vladimir Putin renewed a drive to stem capital flight.

The closures of the three banks, the biggest of which was Investbank - ranked 79th in Russia by assets - were linked to mounting payment problems and dubious operations, it said.

The closures come weeks after the central bank withdrew the license of Master Bank, a mid-sized Moscow bank, in the most potent demonstration that Governor Elvira Nabiullina is serious about halting rampant fraud and money laundering in Russia.

Dodgy banks are the conduit for illegal capital outflows that Nabiullina’s predecessor estimated at $50 billion last year.

Even so, Putin said on Dec. 12 that “nothing has been done” to implement an initiative he launched a year ago to stem capital flight that has sapped both investment and the Kremlin’s coffers.

Continuing closures have highlighted counter-party risks among Russia’s 900 banks, adding to negative sentiment on financial markets. The ruble fell to four-year lows following the latest closures.

The central bank has stripped around 30 banks of licenses since Nabiullina took the helm at the central bank in June.

The license withdrawals of Investbank, Smolensky bank (125th) and Project Finance Bank (129th) - their combined assets are 67 billion rubles ($2 billion), according to Interfax - did not come as a surprise.

All the three have had experienced recent payment problems with depositors and creditors, the central bank said in three separate statements.

Meanwhile, Russia’s central bank left its key interest rate on hold at its monthly meeting on Dec. 13, maintaining its campaign against stubbornly high inflation even as the economy suffers its weakest growth in four years.

The bank said it expected inflation to fall in the first half of 2014 but not to reach its 5 percent target until the second half. Accordingly, it held the benchmark one-week minimum auction repo rate at 5.5 percent, leaving the key policy rate unchanged for the 15th month in a row.