After nearly two months of negotiations with the shareholders of Asian-Pacific Bank (ATB) on the fate of his “daughters” — M2M private Bank, to position itself as a Bank for wealthy clients, the Bank has adopted a series of austerity measures. On Friday, 9 December, the Central Bank revoked the license of M2M private Bank and at the same time appealed to the Prosecutor General, pointing to signs of withdrawal of assets one of the main owners. In this way the regulator hopes to stabilize the condition of the parent Bank — ATB, which is included in the top 50.
The total volume of distressed assets with a high risk of the Central Bank discovered during inspections M2M exceeds RUB 10 billion, or 47% of the Bank’s assets, said the representative of the Bank of Russia. As noted in Central Bank, signs of withdrawal of assets from M2M one of its major owners. The Prosecutor’s office said that the Central Bank M2M has not yet been received.
Risky business model
About the problems of M2M private Bank, it became known last month. On 7 November the Bank did not fulfill obligations on the REPO transaction, as from November 10, has ceased to accept payments. Then the main shareholder of the Bank, ATB, announced that together with the Central Bank working on a plan for the normalization of the work, which was to include the capitalization of the subsidiary. However, as the message of the Central Bank about revocation of license of M2M, in October the Bank of Russia introduced for the ATB restriction on lending “daughter” to prevent further “expenditure of capital and liquidity” of the parent Bank. As explained in the Central Bank, the imposition of restrictions on intra-group transactions and restructuring was aimed at reducing the risks of the parent Bank in connection with unprofitability of the business model of M2M. In particular, M2M lend to major clients on individual conditions. Thus the bulk of loans were issued in foreign currency under the pledge of real estate, as these assets gradually worsened.
ATB points out in his reporting on the high level of losses of M2M. As of November 1, 2016 at the M2M within the group, the loss accumulated in the company exceeded the 3.11 billion. as a result, the capital adequacy ratio did not meet the minimum level, it follows from the statements.
The Central Bank said that it was used “corrective measures” and held meetings with beneficiaries of M2M, but they did not take the necessary steps to save the Bank. “The proposed Bank measures did not provide real assistance M2M private Bank owners (not at the expense of ATB)”, — stated in the comments of the regulator.
The inevitable consequences
The sole shareholder of M2M in the Asia-Pacific Bank. Therefore, one of the ultimate beneficiaries of M2M, mentioned in the comments of the Central Bank, must be a shareholder of ATB. The main shareholders of ATB are the founders of gold miner Petropavlovsk Plc Peter Hambro, Mr. Alexey Maslovsky (the son of ex-Senator Pavel Maslovskiy) and their partner, the owner of the network “Azbuka Vkusa” Andrew Vdovin. In addition, the number of shareholders of ATB — foreign company East Capital Financials Fund AB (owned at 17.91%) and IFC (of 6.71% of the shares).
The Central Bank said that under the current legislation in case of revocation of the license of the Bank the business reputation of the members of the Board of Directors and managers of credit organizations is unsatisfactory. In this regard, the controller should issue an order about dismissal of the head of the legal person is a large owner of the Bank and to reduce its stake in the Bank to 10%. Under IFRS, joint control in respect of the ATB carried out Vdovin, Hambro and Maslovsky. According to the Bank, the largest shareholder is the industry, which through affiliates owns 59,17% ATB. However, only Vdovin member of the Board of Directors of both banks — the parent and child. Vdovin on Friday did not respond to phone calls.
The situation with the revocation of the license of one of the members of the banking group for the sake of another — an unusual decision, experts say. “Before the Central Bank withdrew the license of one of the banks in the group, but it has always been individually — as if it were a separate unit of the banking system, — said Deputy General Director of “FinExpertiza” Natalia Borzov. — About other banks in the group was not mentioned then or head the Bank also lost the license. But never CB GB so, as in the case of M2M. Such in my practice was not met.”
Standard head the banks have maintained their “daughters”, says senior Director of financial institutions ratings Agency Fitch Alexander Danilov. In this case, the Central Bank deliberately imposed limitation to the parent Bank could not support, in order not to jeopardize himself ATB”, — said Danilov.
Central Bank rarely uses such measures, agrees senior lawyer at BMS Law Firm Taras Khizhnyak. He noted that the amount of the insurance liability of the Agency on insurance of contributions (ASV) is small for this jar and is about 800 million rubles.
However, the support of the shareholders in the near future may be necessary, and the parent company, according to the managing Director on Bank ratings Agency “Expert RA” Stanislav Volkov. “We believe that in the current environment, the implementation of the strategic plans of the ATB depends critically on the ability and willingness of its shareholders to quickly recapitalize the Bank,” said Volkov.
Now everything will depend on whether the ATB agreed with the regulator in relation to the postponement of reservation issued by subsidiary loans, says Danilov. “The volume of loans we estimated at 6.5 billion rubles. Without these exemptions and, if necessary, simultaneously create significant reserves against these loans there is a risk of violations of standards by ATB”, — said Danilov. He notes that the Central Bank can go ATB forward, the Bank created reserves gradually as he earns profits, or shareholders have contributed additional funds to the capital of the Bank.
In the ATB claim that now the need for such support there. The Bank said that the situation with M2M does not affect the operation of the Bank. Despite these allegations, on the eve of the decision of the Central Bank at the subsidiary ATB has created a reserve of liquidity. As a result, the value of the liquidity coverage ratio (N2) Bank in 11 times exceeds the minimum preset value, and the value of current liquidity ratio — 4.6 times.