Bank of Russia strip Eurocredit and FDB of licenses

The Central Bank of Russia has revoked as of December 4, 2015 banking licenses held by Eurocredit (Registration No. 2957), and FDB (Registration No. 3071), the Bank of Russia's press service reported on Friday.

The regulator noted that the decision was taken as the lending institutions failed to fulfill federal laws regulating banking activities and also CBR's statutory acts. Also, all capital adequacy ratios of the banks fell below 2%, and their capitals declined beneath the minimum charter capitals as set on the date of their state registration.

FDB, based on CBR data, pursued a high-risk lending policy, investing the money in low quality assets. The proper assessment of the bank's credit risk revealed the full loss of its capital. Eurocredit also invested funds in poor quality assets, but in the meantime it formed no loan loss provisions adequate to the accepted risks. "The additional formation of provisions in required amounts led to the full loss of equity," the Bank of Russia emphasized in a press release.

Both lending institutions were involved in suspicious large-scale transit operations, the Bank of Russia specified.

As the media previously reported, since November 27, 2015 the Bank of Russia has cut off Eurocredit from the Banking Electronic Speedy Payment (BESP) system. Meanwhile, the lending institution said that it had faced a liquidity shortage since early October and was making preparations to have its license revoked.

In late October Russian rating agency RAEX (Expert RA) downgraded FDB's creditworthiness rating to the pre-default level of C++, and set a negative rating outlook.