#12 - JRL 8284 - JRL Home
Moscow Times
July 7, 2004
Banking Crisis Russian-Style
By Yulia Latynina
Russian banks are coughing and wheezing. Dialog-Optim announced that it was limiting deposit withdrawals, while CreditTrust has had its license revoked. It is quite astonishing. There is no GKO pyramid, and world oil prices are sky-high. According to the financial barometer, there should be complete calm -- and yet a storm is brewing: Interest rates on the interbank lending market are breaking records, and the only thing saving Russia from a fully fledged banking crisis is the absence of a fully fledged banking system.
It all began, of course, with Sodbiznesbank, which had its license stripped amid accusations of money laundering connected to a murder investigation. The ransom money for KamAZ deputy general director Viktor Faber, kidnapped and killed by the Tagiryan criminal group, was transferred to the accounts of certain front companies opened at Sodbiznesbank. Fair enough: Accepting money from who-knows-where and from who-knows-whom was Sodbiznesbank's core business. And yet the prosecutor's office saw fit to accuse the bank of money laundering while letting its bosses go free.
Moreover, the bank, which more than anything resembled a launderette, had succeeded in attracting private depositors. Just as terrorists need hostages, so the bank needed depositors to serve as human shields. When the bank's license was revoked, its unfortunate depositors began to panic.
Then depositors at the long-bankrupt First Municipal Bank decided to jump on the bandwagon. They demanded the arrest of the Faberg eggs purchased by Viktor Vekselberg. However, on closer inspection, it transpired that there were very few depositors, the most active among which was a certain Armen Rshtuni. According to the documents, Rshtuni, who was close to First Municipal's management, lost all 180 million rubles of his modest savings in the bank. On even closer inspection, however, it transpired that the documents in question were bank promissory notes, exchanged in fictitious banking operations for the promissory notes of firms that only existed on paper and were controlled by relatives of Rshtuni.
This is a classic scheme for stripping banking assets, but even in the no-holds-barred '90s, the scheme was only used to avoid paying real creditors. The fact that two years after the bank's bankruptcy, the owners of such promissory notes should demand money from an oligarch whose only crime is that one of the banks with which his companies worked had accounts at First Municipal is unprecedented in Russia. Maybe it has something to do with the fact that Rshtuni, until recently, was adviser to Yukos CEO Simon Kukes. When Rshtuni quit the company, the leaking of confidential company documents to the prosecutor's office suddenly ceased. It is likely that friendly relations developed with people in the prosecutor's office and enabled this "creditor" of the long-bankrupt First Municipal to take a swipe at Vekselberg's eggs.
The market got agitated. No doubt people understood that an unprecedented period of mayhem was beginning. The market needed calming. And then a St. Petersburg silovik and head of the Financial Monitoring Service, Viktor Zubkov, stepped up to add his 10 cents worth. Zubkov declared that another 10 banks might lose their licenses. That was when bank blacklists started doing the rounds, with everyone adding their own enemies to the list.
So President Vladimir Putin had to intervene. Someone told him that the process taking place was called "introducing order to the banking system"; and the president said that order should be introduced with care. If Putin had backed up his words by firing those officials who had provoked the crisis with their stupid statements, perhaps things would have calmed down. But he did not.
And the crisis continues. All this talk about "introducing order" misses the point: In a country where there is no functioning law enforcement system, there can be no proper banking system.
Yulia Latynina hosts a political talk show on Ekho Moskvy radio.