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Central Bank might cancel MezhPromBank’s license

The Central Bank of Russia might cancel the license that allows OAO MezhPromBank to deal in banking activity due to a number of formal reasons.

According to RIA Novosti, the bank reconsidered the quality of its lending portfolio on July 13, 2010 and declared almost 100% of its loans were bad ones. This means MezhPromBank has to create additional reserves, which will lead to capital inadequacy and violate the legal requirements set for the Russian banks. In this case, the Bank of Russia will have to cancel the bank’s license automatically.

Now MezhPromBank was first unable to pay off its 32 billion RUR worth of unsecured loans to the Bank of Russia, so the latter gave it a six-month extension. Then, the bank overlooked a technical default worth ?200m in the Eurobonds area.

MezhPromBank’s possible collapse might become the Russian market’s loudest bank crash since 2004.
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