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Bank of Moscow bailout sparks accusations

July 2, 2011 at 6:34 PM   |   Comments

MOSCOW, July 2 (UPI) -- Russian Finance Minister Alexei Kudrin has demanded an investigation of the Bank of Moscow, amidst accusations of fraudulent loans.

One-third of the bank's assets -- valued at $9 billion -- were discovered to be bad loans, forcing the Russian central bank to give the Bank of Moscow a $14 billion rescue loan at 0.5 percent interest, the British Broadcasting Corp. reported Saturday.

The Financial Times reported the bad assets were uncovered as VTB increased its stake in the bank to 46.5 percent through a hostile bid.

The bailout is the largest bank rescue in Russian history, sparking a round of accusations seemingly from all corners.

Investors accused the central bank of lax oversight. Others wondered how VTB could make such an enormous purchase without a thorough investigation first.

Former Bank of Moscow President Andrei Borodin -- in London, fleeing a warrant for his arrest -- said the takeover of the bank was politically motivated. In Moscow, VTB charged the Bank of Moscow with "fraudulent lending," the BBC said.

Borodin and business partner Lev Allaluyev owned 20.3 percent of the bank. For the past month, they rejected VTB's offers and, instead, sold out their shares to businessman Vitaly Yusufov.

The terms of the bailout include a nominal 0.5 percent interest on a five-year loan. VTB is also expected to increases its share in the bank to 75 percent.

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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