Russia pulls plug on 'VIP' bank Vneshprombank

Russia pulls plug on 'VIP' bank Vneshprombank

Moscow (AFP) - Russian authorities on Thursday declared insolvent the large Vneshprombank, which reportedly counts several members of the country's political elite as clients.

The central bank said in a statement it had withdrawn the licence of the bank, the country's 40th-biggest out of a total 700.

Vneshprombank had over a long period overstated the value of its assets and lied about its accounts, the central bank had said after an earlier investigation, adding that it had also been involved in money-laundering.

Last month the bank, suffering from an acute liquidity shortage, had been placed under administration pending a recovery plan.

The authorities had grappled with weighing the high cost of a government rescue against the impact of bankruptcy on creditors and savers, but in the end decided to let it go bust.

According to Forbes magazine, Vneshprombank counts among its customers the families of Russia's defence minister and of its vice president, as well as the head of the country's Olympic committee and its ambassador to Ukraine.

Other media have said that the Orthodox Church and oil company Transneft also bank with Vneshprombank.

The bank is sitting on a capital deficit of 187 billion rubles (2 billion euros, $2.2 billion).

Russian authorities have been trying to clear the banking sector of hundreds of fragile banks who are often found to employ doubtful or illegal practices.

A recent fall of the ruble, which hit record lows against the dollar on Thursday, has accelerated the movement, leading to dozens of bankruptcies in the sector.

The central bank on Thursday also shut down two smaller banks, Miraf-Bank and Turbobank.

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