Bank of Moscow

The Bank of Moscow (Банк Москвы) was a Russian bank that provided banking services to both corporate and retail customers until May 2016.[1] Headquartered in Moscow, the bank had 267 outlets, including branch offices and cash desks. BoM had over 114,000 corporate and 9 million retail customers. In 2011 it was the fifth largest bank in Russia.[2] As of 1 July 2016, it had 6.3 million banking cards in its portfolio. Its central office was located in the building of the Moscow International Bank in Moscow, on the corner of Kuznetsky Most and Rozhdestvenka streets.

Bank of Moscow
Native name
Банк Москвы
Traded asMSKB@RU
ISINRU0006571916 
IndustryFinance
FateMerged with VTB Bank
SuccessorVTB Bank
Founded1995 (1995) (as Moscow Municipal Bank - Bank of Moscow); 2016 (as VTB Bank)
DefunctMay 10, 2016 (2016-05-10)
Headquarters
Moscow
,
Russia
Number of locations
42 branches in Moscow and Moscow region and 43 branches in major cities of Russia
Area served
Russia
Key people
Andrei Kostin (Chairman)
ServicesBanking
AUMRUB 669 bln
Total assetsRUB 958 bln
Total equity121,6 billion rubles. (2009, IFRS )
Number of employees
10504 (30 September 2009)
ParentVTB Bank 
Websitewww.bm.ru/en

On May 10, 2016 its merger into VTB Bank was finalized.[3]

In 2011, following a hostile takeover by VTB Bank, US$9 billion in fraudulent loans were discovered, and the bank received an unprecedented US$14 billion bailout.[4] Russia has issued an international arrest warrant for Andrey Borodin for his suspected role in the fraud.[4]

History

1995: The bank was established under the name Moscow Municipal Bank – Bank of Moscow.

1999: Estonian Credit Bank enters into a cooperation agreement with the Bank of Moscow, and in 2012 the Bank of Moscow becomes its biggest shareholder.

2004: The bank was renamed as Bank of Moscow JSCB.

2005: BM Bank (Ukraine) established as BoM’s subsidiary.

2009 : Vedomosti newspaper published an article alleging that in the summer of 2009, as most real estate development companies suffered from the economic crisis, Inteco, a developer controlled by Yelena Baturina, the wife of then Moscow Mayor Yury Luzhkov, paid back a RUB 27 billion loan ahead of schedule. According to the newspaper, it was able to do so, among other things, by selling a 58ha land plot in the southwest of Moscow for RUB 13 billion, thus valuing 1 ha of land at RUB 220 million. The land was reportedly acquired by an entity affiliated with the Bank of Moscow. The newspaper even claimed that the purchase was paid for using a BoM loan.

2010: Moscow Mayor Yury Luzhkov signs a directive to use municipal funds to support the bank. According to the document, RUB 7.5 billion were allocated from the city budget in 2010 to buy up the bank’s additional share issue.

2011: in February–September VTB obtains a controlling 51% stake in BoM.

By February 2011, the Moscow government's 46.48% ownership had been completely sold to VTB Bank. VTB also acquired 25% plus one share of Capital Insurance Group, which had a 17.32% stake in the Bank of Moscow. The total purchase price was 103 billion rubles. Besides VTB, the Russian Alfa Bank,[5] and Bank Austria, a subsidiary of UniCredit,[6] declared great interest in buying the Moscow government's stake. The sale was made to VTB (according to the representative of the Moscow mayor's office) because of a higher price offered and the availability of complete documentation, including a permit to purchase from the Russian Federal Antimonopoly Service.[7] In March 2011, VTB bought shares owned by Credit Suisse (2.77%) and shares owned by a Swiss fund (1.7%),[8] bringing its stake to a controlling interest of approximately 51%.

In early April 2011, Andrey Borodin and Lev Alaluyev sold their 20.32% stake in Bank of Moscow to Vitaly Yusufov, son of the former Russian Energy Minister Igor Yusufov.[9] Vitaly Yusofov had borrowed US$1.1 billion from the Bank of Moscow for this acquisition.[10]

Borodin himself, who by this time had been indicted in absentia for abuse of office, said that the transaction was carried out with a "torn off by hand",[11] and that the change of leadership at the bank led to the raids.[12] By the end of September 2011, VTB had acquired more than 80% of the shares of the Bank of Moscow,[13] buying from Vital Yusufov (20%), and Suleiman Kerimov (3.88%). Shares were also acquired as part of a package of the Metropolitan Insurance Group.[14]

The media suggested when Borodin left, more than half of the bank's loan portfolio consisted of loans issued to companies affiliated with Borodin. Borodin himself refused to comment on this information.[15] According to an investigation by the newspaper "Vedomosti", the total amount of loans granted by the bank to companies associated with Borodin was approximately 217 billion rubles, which exceeded the bank's equity. According to the newspaper, a significant part of these loans were used to repay loans which were dubious or not secured by liquid assets,[16] and later this information was confirmed by an inspection of the Accounts Chamber of the Russian Federation.[17]

Later, it was announced by VTB that the bank had 380 billion rubles in bad debt.[14] As a result, in late September 2011 the Deposit Insurance Agency provided a loan for 10 years, amounting to 295 billion rubles. At 0.51% per annum (DIA itself provided the money to the Bank of Russia) to cover the newly formed "holes" in the accounts of the bank.[18][19]

29 July 2014: the Office of Foreign Assets Control (OFAC) published that the Bank of Moscow and VTB Bank OAO, which is the second largest bank in Russia, has been added to the Sectoral Sanctions Identifications List. A United States person or a person in the United States is restricted from buying equity issued by these banks or lending money to these banks (i.e. buying debt issued by these banks). The sanction is for "transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity" with these banks or their property or interests in property.[20][21][22][23][24][25]

31 July 2014: VTB and its subsidiaries, such as the Bank of Moscow, were added to the European Union sanctions list due to its role in the 2014 Crimean crisis.[26] VTB assets and its subsidiaries, such as Bank of Moscow, in the EU have to be frozen.

13 August 2014: United States clarifies entities under sectoral sanctions. United States increases its sectoral sanctions on VTB Bank together with its subsidiaries (“the VTB Group”) and the Bank of Moscow through its parent bank, VTB Bank OAO, and other entities that VTB has 50% or greater ownership either individually or in the aggregate, either directly or indirectly. Also, US persons cannot use a third party intermediary and they must use caution during "transactions with a non-blocked entity in which one or more blocked persons has a significant ownership interest that is less than 50% or which one or more blocked persons may control by means other than a majority ownership interest."[27]

12 September 2014: the United States issues a consolidated listing of directives associated with Executive Order 13662 sanctions during the Ukraine crisis. For the Russian financial sector, Directive 1 was amended to increase the financial sanctions on the Russian financial sector for "all transactions in, provision of financing for, and other dealings" in new equity or new debt issued on or after 12 September 2014 to longer than 30 days maturity. New equity or new debt issued from 29 July 2018 until 12 September 2018 was sanctioned if longer than 90 days maturity.[24][28][29][30]

22 December 2015: United States explicitly lists VTB Bank and its subsidiaries that are sanctioned. Previous United States sanctions on VTB and its subsidiaries have already restricted VTB, VTB Global, Bank of Moscow, and other entities from gaining long term financial support from any United States person or person in the United States.[22][23][24][31][32]

2016: VTB brings its stake in BoM to 100 percent.

1 September 2016: United States explicitly lists Bank of Moscow and its subsidiaries that are sanctioned. Previous United States sanctions on VTB and its subsidiaries have already restricted VTB, VTB Global, Bank of Moscow, and other entities from gaining long term financial support from any United States person or person in the United States.[22][23][24][33]

28 November 2017: the United States increases the Executive Order 13662 sanctions to the Russian financial sector. For the Russian financial sector, Directive 1 was amended to increase the financial sanctions on the Russian financial sector for "all transactions in, provision of financing for, and other dealings" in new equity or new debt issued on or after 28 November 2017 to longer than 14 days maturity. New equity or new debt issued from 12 September 2014 until 28 November 2017 was sanctioned if longer than 30 days maturity.[34]

Performance

As of 31 December 2014, the assets of the Bank of Moscow amounted to RUB 2,129.1 billion, liabilities were equal to RUB 1,941.5 billion, and equity at RUB 187.6 billion.

Rating

International rating agencies and rankings
  • Moody’s Investors Service: Long-term deposit rating;
  • Standard & Poors: Long-term deposit rating in local & foreign currencies – BB-, negative outlook;
  • Brand Finance valued the BoM brand in February 2011 at USD 842 million and included it in the top 200 of the leading financial brands in the world;
  • BoM advanced by 86 positions, from 190th to 104th place, in The Banker ranking of Top 500 Banking Brands for 2012.

Russian rating agencies and rankings
  • RETAIL FINANCE AWARDS 2015: best in the Best Creative Solution of the year category;
  • Expert RA 2015: top 3 Russian bank in mortgage loans[16]; highest growth in small-business lending portfolio;
  • Usabilitylab 2015 ranking: 4th place in a ranking of user-friendly online banks[18]; 2nd in the ranking of mobile banking applications by user friendliness.
  • In 1995-2005, BoM’s logo represented a red M with “The Bank of Moscow” written below it.
  • In 2005-2016, BoM’s logo evolved into a bold M reminiscent of the spires on the Moscow Kremlin wall with “The Bank of Moscow” written below it.
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References
  1. "Reorganization :: About Bank :: VTB Bank of Moscow". www.bm.ru. Archived from the original on 4 June 2016. Retrieved 12 May 2016.
  2. "About the Bank :: Bank of Moscow". Bank of Moscow. Archived from the original on 23 July 2011. Retrieved 8 July 2011.
  4. "Russia rescues Bank of Moscow in record bail-out". BBC News. 1 July 2011. Archived from the original on 3 July 2011. Retrieved 3 July 2011.
  5. "Alfa Bank eyes Bank of Moscow stake - report". Reuters. 24 January 2011. Retrieved 2 May 2012.
  6. "Bank Austria Bids for Bank of Moscow". FriedlNews. 14 January 2011. Retrieved 2 May 2012.
  7. A Vendmosti.com article on the transaction
  8. "VTB stake in Bank of Moscow still below controlling interest - official". RIA Novosti. 21 March 2011. Retrieved 7 May 2012.
  9. Sergei Piatakow (4 March 2011). "Borodin sells Bank of Moscow stake at knock-down price - Vedomosti". RIA Novosti. Retrieved 8 May 2012.
  10. Marina Sysoyeva (11 April 2011). "Bank of Moscow Stakes Sold to Vitaly Yusufov, Vedomosti Says". Bloomberg. Retrieved 8 May 2012.
  11. Naila Asker-zade. "Borodin passed the Bank". :ru://Ведомости. Retrieved 11 April 2011.
  12. "Saga of the Bank of Moscow: the end of the chapter". // rian.ru. Retrieved 13 April 2011.
  13. "Russia's VTB buys 81 pct in BoM, ends long battle". Reuters. 29 September 2011. Retrieved 17 May 2012.
  14. Gleb Klimentyev. "State Bank of Moscow". // gazeta.ru. Retrieved 30 September 2011.
  15. Naila Asker-zade. ""In business, you should not trust people," - Andrei Borodin, the former president of Bank of Moscow". // Ведомости, 20 April 2011, № 70 (2836). Retrieved 20 April 2011. A Russian language page
  16. Svetlana Petrova, Nail Asker-zade. "Borodino panorama". // Ведомости, 15 June 2011, № 107 (2873). Retrieved 15 June 2011. This page is in Russian
  17. Gleb Klimentyev. "Money for Faith". // gazeta.ru. Retrieved 7 July 2011.
  18. "Another approach could not be". // Коммерсантъ, № 185 (4726), 4 October 2011. Retrieved 4 October 2011. (In Russian)
  19. Tatiana Voronova. "Without prejudice to the VTB". // Ведомости, 4 July 2011, № 120 (2886). Retrieved 4 July 2011. This is a Russian Article
  20. "Announcement of Additional Treasury Sanctions on Russian Financial Institutions and on a Defense Technology Entity". US Department of the Treasury. Retrieved 10 February 2018.
  21. "Sectoral Sanctions Identifications; Kingpin Act Designations; Iran Designations Update; Ukraine-related Designation". US Department of the Treasury. Retrieved 10 February 2018.
  22. President of The United States (24 March 2014). "Ukraine EO13662" (PDF). Federal Register. Retrieved 10 February 2018.
  23. "Sectoral Sanctions Identifications (SSI) List". OFAC. Retrieved 24 March 2018.
  24. "Ukraine-/Russia-related Sanctions: Sectoral Sanctions under Executive Order 13662, CAATSA". OFAC. Retrieved 24 March 2018.
  25. "Ukraine conflict: US and EU widen sanctions on Russia". BBC. 30 July 2014. Retrieved 10 February 2018.
  26. "COUNCIL REGULATION (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine". THE COUNCIL OF THE EUROPEAN UNION. eur-lex.europa.eu. 31 July 2014. Retrieved 10 February 2018.
  27. "Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are Blocked" (PDF). United States Department of Treasury. 13 August 2014. Retrieved 22 March 2018.
  28. "Ukraine-related Sanctions". United States Department of Treasury. 12 September 2014. Retrieved 22 March 2018.
  29. "Ukraine-/Russia-related Sanctions; Sectoral Sanctions Identifications (SSI) List: EO 13662 Directives". United States Department of Treasury. Retrieved 24 March 2018.
  30. "Directive 1 (as amended) under Executive Order 13662" (PDF). OFAC. 12 September 2014. Retrieved 24 March 2018.
  31. "Treasury Sanctions Individuals and Entities for Sanctions Evasion and Other Activities Related to Russia and Ukraine: Underscores U.S. Commitment To Work With The EU To Maintain The Efficacy Of Existing Sanctions Until Russia Fully Complies With Its International Obligations With Respect To Ukraine". US Department of the Treasury. 22 December 2015. Retrieved 10 February 2018.
  32. "Russia/Ukraine-related Sanctions and Identifications: Specially Designated Nationals List Update". US Department of the Treasury. 22 December 2015. Retrieved 10 February 2018.
  33. "Treasury Sanctions Individuals and Entities for Sanctions Evasion and Other Activities Related to Russia and Ukraine: U.S. Will Maintain Sanctions Pressure Until Russia Has Fulfilled All of Its Commitments under the Minsk Agreements". US Department of the Treasury. 1 September 2016. Retrieved 24 March 2018.
  34. "Directive 1 (as amended) under Executive Order 13662" (PDF). OFAC. 29 September 2017. Retrieved 24 March 2018.
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