The Central Bank Withdrew License fr om the Master-Bank from November 20
For the Russian banking sector, the withdrawal of the license from the bank which attracts funds from the population has become a precedent. As of November 1, 2013 individuals' funds with the bank amounted to Rb 47bn. It is to be noted that in the past few months the bank experienced an outflow of customers' funds: within three months the volume of deposits fell by Rb 2bn.
Individuals's funds in deposits with the Master-Bank within the limits of Rb 700,000 are subject to repayment through the Deposit Insurance Agency (DIA) which is to assign the agent-bank for repayment of funds to depositors of the Master-Bank and start repayments within two weeks from the date of withdrawal of the license.
According to the estimates of the DIA, the extent of payments will amount to Rb 30bn, that is, an unprecedented amount since the day of existence of the deposit insurance system. The previous "record" was set by the Pushkino Bank from the Moscow Region wh ere payments to depositors were estimated at Rb 20,2bn. According to the data of the Agency, early in November the funds of the Fund for Mandatory Insurance of Deposits exceeded Rb 230bn. So, as a result of payments to depositors of the Master-Bank the resources of the Fund will decrease by nearly 15%. With the existing norms of deductions (0.1% of the deposit base in a quarter), replenishment of the volume of the Fund to the previous level will take at least six months.
Deposits in excess of Rb 700,000 are put in receivership and set in the first order of loans in organizing of the banks' bankruptcy proceedings. From the experience of other banks which went bankrupt that process may take several years.
According to Elvira Nabiullina, Chairman of the Central Bank of Russia the Master-Bank's real capital is equal to Rb 2bn. It means that with the volume of own funds in accordance with the 2012 reporting being equal to over Rb 8bn (the bank did not make public the operating data on the amount of its own funds) the volume of the hidden losses is estimated at more than Rb 10bn.
An interesting fact is that the actual value of loans extended by the Master-Bank to individuals in 2013 amounted to less than 8% per annum with the average market value of over 18%. The above may point to the fact that most loans were extended on non-market terms or on special terms to affiliated persons or under various cash withdrawal schemes.
The Master-Bank had a large network of ATMs in Russia. In addition to that, it rendered processing services to other banks; by estimates about 260 banks were its customers. Consequently, after the license was withdrawn from the Master-bank operations were suspended with cards of other banks which used the Master-Banks' processing services. At present, the Central Bank of Russia has to solve promptly the issue of assignment of the Master-Bank's processing to an efficient credit institution so that outside customers could carry out operations with their cards.
Also, merchants using the Master-Banks' acquiring services will have temporarily to stop accepting payments by banking cards prior to conclusion of a new agreement with effective banks.
М.Yu. Khromov, Leading Expert of the Structural Research Center