Page 56 - bnemagazine bne_December 2021_20211203.pdf

56 I Eastern Europe bne December 2021
creation of the Banking Sector Consoli- dation Fund (BSCF) earlier that year,
a vehicle specifically designed to hold banks that allows the CBR to own banks, while at the same time be the regulator of banks – a highly unusual setup.
The BSCF legislation was enacted by the Duma on April 21, 2017, but it only became functional in August when it was used for the first time – to take over Otkritie.
Nabiullina's clean-up has been highly successful, but the main vehicle for exer- cising it has been the Deposit Insurance Agency (DIA).
During the so-called wildcat banking days of the 1990s, thousands of banks were set up, many of which were at best “glorified treasury operations” and at worst “bank-like institutions,” as famous bank analyst Kim Iskyan dubbed them at the time, that were acting as money chutes to whisk cash offshore, facilitat- ing capital flight and dodge taxes.
Nabiullina managed to close thousands of these banks – as of October there are only 373 credit institutions left, down from over 4,500 in the 1990s – without undermining confidence in the system.
The way it worked is: the CBR pulled a dodgy bank’s licence and the DIA took over and gave all the depositors back their money up to a maximum of about RUB1mn (about $15,000 at today’s exchange rates).
The system worked so well that some savvy depositors began to seek out the riskiest banks because they were paying the highest interest rates, confident that when the banks were eventually shut- tered they could get their money back in a few days from the DIA and look for the next high yielding bank account.
But the DIA was already losing favour with the CBR as bailing out corrupt banks was costing the state billions of dollars a year. Moreover, the DIA simply didn't have the resources to take on
the much bigger commercial banks. Although the mechanism worked well for years, an investigation by Russian
www.bne.eu
publications Meduza, Project and Vtimes showed the DIA was also extremely cor- rupt. Another part of the clean-up was to ease the DIA out of the process and it was finally closed by the CBR last year. The Banking Consolidation Fund, under the direct control of the CBR, has now taken over the DIA’s role.
Mints says the transition from the DIA to the BSCF, plus a series of other smaller changes to the banking sector regula- tions, were all made in preparation for an attack on the Garden Ring banks.
“In addition to the creation of the Bank- ing Sector Consolidation Fund, there were lots of little tweaks which the CBR put in place between 2015 and 2017 together with the new rules on ACRA ratings that allowed them to engineer a situation where they could nationalise all the biggest private banks in the sec- tor, excluding the banks that were con- nected to the leadership,” said Mints.
Aftermath
Afraid they would eventually be arrest- ed, the Mints family left for London and have lost all their Russian businesses, where they are still fighting a legal assault by the Russian authorities.
Many Russian bankers have fled to the UK capital to seek asylum and a routine has been established where the now state-owned banks bring cases against them in the UK High Courts in an attempt to recover what the state claims are stolen assets – and in many cases the assets were stolen.
In June 2019 Otkritie, now under the control of the BSCF, brought a similar case against the Mints family seeking $800mn in damages. The Mints responded in kind with a claim against the Russian state for the same amount claiming they had been dispossessed of their assets illegally. The Russian authorities promptly responded by launching a criminal case against them in Russia.
“They also issued an international arrest warrant via Interpol, but in May this year we got a certificate from Interpol rejecting Russia’s request to arrest us
and saying that there was insufficient evidence to link the underlying charges in Russia to our family,” says Mints.
The case brought by Otkritie in the
High Court has not gone very far either. First, the proceedings were delayed by the coronavirus (COVID-19) epidemic and secondly, Otkritie brought in more defendants from the Garden Ring banks, who have tied the case up by challeng- ing its jurisdiction.
“We will fight to protect ourselves but I don't want to go back to Russia now, as I don't want to live in a country like that. Sure I will miss my friends and it is my motherland, but things have changed,” says Mints.
At the end of 2017 the Moscow Arbitrage Court arrested the shares of O1 Proper- ties and Nevis business centre, in a law- suit brought by Otkritie. In March 2018 Boris Mints announced that he had fully quit the market. In a 2014 interview with bne IntelliNews when the O1 group was at its height, Mints said he had recently closed a deal to sell a stake to Goldman Sachs, but the US investment banks has also managed to exit, selling its stake, and the company has also been taken over by “structures close to Sechin,” claims Mints.
Mints believes that these takeovers asso- ciated with people surrounding Rosneft were not part of the CBR plan to bring down the Garden Ring banks, but simply powerful people close to the administra- tion taking advantage of the Mints fam- ily problems to grab some of the most attractive assets on the market.
“I think we are collateral damage,” Mints says phlegmatically. “What was going
on was to do with the banks. Today amongst the top 50 banks there are three categories: the biggest state-owned banks, which account for about 80% of the assets; the leading privately owned banks like Raiffeisen and Alfa, but their share is smaller and falling; and a few surviving commercial banks that are all owned by people close to the government. The CBR may have been cleaning up the sector, but it also got rid of any real privately owned capital in the system.”