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54 I Eastern Europe bne December 2021
In 2017 Russia had a near-miss banking crisis that saw Otkritie Bank collapse and that took out O1 Group, Russia's most successful property company.
Operation Garden Ring banks
story it soon transpired that the Garden Ring banks were indeed in trouble.
The note proved to be prescient. The most dynamic of all the Garden Ring banks, Otkritie, was soon in the firing line. Short of liquidity, the bank cashed in bonds and appealed to the CBR for help. Its operations were disrupted as depositors began to withdraw money, and by the end of the month deals on the repo market soared in August as banks began to build up war chests, swapping their bonds for crisis-fighting cash, afraid yet another banking crisis was about to break.
Things went from bad to worse. In late August, the CBR provided an unspeci- fied bailout loan to Otkritie, but a week later the regulator finally pulled the plug and took over the bank, placing it under the control of its newly created Bank- ing Sector Consolidation Fund (BSCF). A second bank, BIN Bank, fell shortly after. More banks went to the wall in the months that followed. Eventually the BSCF took over all of: Otkritie, Binbank, Trust, Promsvyazbank, Sovetsky Bank, NB Trust, Rost Bank, AVB Bank, ATB, Moscow Industrial Bank and Volgo- Oksky Commercial Bank.
In a fudge, the CBR did not nationalise these banks but only “took control,” which avoided the need for expensive bailouts. Eventually the banks would be sold off, the CBR said, claiming its con- trol was “temporary”. And indeed, three years later this week Otkritie announced it was back in profit and will list its shares early next year.
At the time, the crisis was seen as part of CBR Governor Elvira Nabiullina’s campaign to clean up the sector. Since taking over the governorship in 2013 Nabiullina has been closing down on average three banks a week for four years, but in the summer of 2017 only the largest commercial banks were left, each of which was large enough to spark a systemic crisis if their reform was badly handled.
The summer ended being very tense. But as the restructuring work began in September fears rapidly faded and repo
shut down
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The Mints family used to be one of the biggest players on the Moscow real estate market and their O1 Properties owned a portfolio of some of the best buildings in Moscow worth bil- lions of dollars. But they got caught up in the collapse of the so-called Garden Ring banks in 2017, a group of Russia’s biggest privately owned banks located inside the ring road that encloses the heart of the capital. Now they live in London, where the family has been fending off legal assaults by the Russian authorities.
“We are collateral damage,” Dmitri Mints, the former director of O1 Group, told bne IntelliNews speaking for the first
commercial banks in a controversial move. The regulator said the move was necessary after many of these banks had seen depositors flee, but critics claim the crisis was actually carefully planned and orchestrated by the regu- lator. At the end of crisis the CBR ended up controlling almost all of the coun- try’s leading formerly privately owned commercial banks. Only a few survived.
A hot August for bankers
The first sign of trouble came when the market was shaken by a research note issued by an analyst at Alfa Capital in August 2017 that warned several of the Garden Ring banks – FC Otkrytie, B&N Bank, Credit Bank of Moscow (MCB) and
“In a fudge, the CBR did not nationalise these banks but only “took control,” which avoided the need for expensive bailouts”
time to the international press about what actually happened that year and how his business collapsed.
Russia’s banking sector came close to
a full-scale meltdown in the summer of 2017. The Central Bank of Russia (CBR) nationalised several of Russia’s biggest
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Promsvyazbank – were in trouble and could collapse at any minute. The note was hastily withdrawn and the analyst reprimanded. Alfa Capital released a statement reassuring the market and say- ing nothing was wrong. But the note start- ed off speculation that something might be wrong and as journalists dug into the