Why Russia Doesn’t Deserve an ‘A’

Published in The Moscow Times
By Andrey Borodin

Around the globe, there is a heated discussion among policymakers, bankers and analysts about the role of the major credit ratings agencies. This discussion was provoked after we witnessed their incompetence in rating collateralized instruments in the early 2000s. According to the U.S. Financial Crisis Inquiry Commission 2011 report, they were “key enablers of the financial meltdown” in 2007 and 2008. The discussion has been reignited recently by Standard & Poor’s decision to downgrade the U.S. credit rating. Continue reading

But the emperor isn’t wearing any clothes!

Blog of Vladimir Krasnov, Andrey Borodin’s Attorney, on the website of “Echo Moskvy”

So, today Andrey Borodin made a very important statement (Borodin’s blog 31 August).

As the lawyers say, the cause and reason for this is a new campaign, initiated in the media close to authorities, dedicated to the “new charges.” On 29 August, as if by command (although, why as if?), TV channels “Russia” and NTV, Itar-Tass, RIA-Novosti, and others, who followed them, happily reported that the Investigatory Department of the Ministry of Internal Affairs had “new questions” for Andrey Borodin and his associates. The logical conclusion to this bacchanalia was put by ‘Rossiyskaya Gazeta’ on 30 August.

Given how much there has been already said and how many more of such “stories” will be mentioned, it is not interesting to repeat these “new” allegations.

Something else is interesting.

Andrey Borodin is right to pay attention to the fact that yet another hysteria in the press is a reaction to his difficult questions about the fate of 103 billion rubles as well as the validity and extent (1% of GDP) of public participation in the “rescue” of the bank, acquired by VTB through a hostile takeover. Also, his rhetorical questions about who may benefit from this are rather uncomfortable. …

Statement by Andrey Borodin

I must go on record in response to recent allegations of ‘criminal acts’ of which I am accused within Russian media. Again citing unnamed sources in the Interior Ministry of Russian Federation the reports purport to suggest that the Investigatory Department, which is apparently leading a preliminary investigation in to my actions while CEO of the Bank of Moscow is supposed to have alleged “virtually all loans were issued to Cyprus offshore companies,” and “instead of $63 million, which were present in the case earlier”, I and my colleagues, “may be (?) charged with the illegal issue of unsecured loans for more than $6 billion” (Kommersant, 29.08.2011). Continue reading

Borodin’s house and land remain under arrest

Business FM

On 31 August the Moscow City Court upheld the decision of Tverskoy City Court for the arrest of property of the former head of Bank of Moscow Andrey Borodin, who is accused of abuse of powers in the issuance of the 12.7-billion loan to “Premier Estate.” The appeal of defense was dismissed.

… Borodin’s lawyer Mikhail Dolomanov insisted that the court decisions be cancelled and that the case be sent to the district court for retrial. In his opinion, the hearings, to which the defense lawyers of the accused were not even invited, were only a matter of formality. Based on the court records, the hearing in both cases took less than five minutes. The lawyer was outraged as he said that even during the times of the Stalin repressions it took longer to make a decision than it took in this case for the Tverskoy Court. …

Experts: Bank of Moscow got caught up in politics

RBC

Experts doubt that Bank of Moscow, a bank with good ratings, could turn into the most problematic credit institution of the country just in one year. This was possible because “there is a lot of politics involved, but it would not be correct to say that Bank of Moscow turned immediately from a very good bank to a bank with problems,” said President of the Association of Russian Banks, Garegin Tusunyan, during the RBC-TV program “Dialogue with Viktor Gerashchenko”.

“If politics forces its way in, it is possible to turn any institution into something doubtful,” stressed Tusunyan.

And this can be done quickly, easily, but it is very difficult to turn a problem bank back in to a good one, according to Tusunyan.

Watch RBC-TV program “Dialogue with Viktor Gerashchenko” here.

Bank of Moscow bailout saved VTB – ex-CEO

By Douglas Busvine, Reuters

* Exiled former CEO defends lending practices

* Says VTB exaggerated bad loans at Bank of Moscow

* Loan that financed stake sale well secured – Borodin

MOSCOW, Aug 30 (Reuters) – The former head of Bank of Moscow MBMM.MM has denied defrauding Russia’s fifth-largest bank, saying the $14 billion bailout it received was in reality intended to save its suitor, state-controlled VTB (VTBR.MM).

Andrey Borodin dismissed allegations by VTB and the Russian authorities that he improperly lent billions of dollars to firms he controlled — loans that went bad after he was ousted, forcing the central bank to launch the record rescue last month.

Borodin, who fled Russia at the end of March and is wanted by a Moscow court on an international warrant, told Reuters that VTB had sought to depict Bank of Moscow’s financial condition in the worst possible light to conceal its own balance-sheet woes.

Read full article here.

Power Play in Russia

Finanz und Wirtschaft

The fate befalling the Bank of Moscow and its CEO Andrei Borodin, author of the adjacent article, is reminiscent of the plot in a bad Hollywood film. The details of what exactly transpired behind the scenes that led the 43-year-old Borodin, sought by the Russian authorities for mismanagement of the Bank of Moscow, to live in exile in London are unclear. “Finanz und Wirtschaft” attempts to trace the course of events. The Bank of Moscow founded in 1995 by the city of Moscow and its mayor Yuri Luzhkov, emerged as one of Russia’s top banks under the leadership of Borodin, a close confidante of Luzhkov. Even as the financial crisis unfolded, the bank maintained buoyant growth and enjoyed the confidence of many western investors. As a result, in July 2010 Goldman Sachs and Credit Suisse jointly acquired a 6.6% holding of the bank’s shares. Everything was going smoothly. Continue reading

Ex-Bank of Moscow Chief Says VTB Bailout Takeover Is ‘Political’

By Maria Levitov and Henry Meyer, Bloomberg

The “political” takeover of Bank of Moscow by Russia’s state-owned VTB Group led to the biggest bank bailout in the country’s history to transfer government money to Bank of Moscow’s new shareholders, former chief executive officer Andrei Borodin and his representatives said.

“The criminal prosecution and takeover of Bank of Moscow are part of the same chain of the political decision to change shareholders at Bank of Moscow and to place it under government control,” Borodin said in an e-mailed statement yesterday. Continue reading

Bank rescue with a question mark; accusations in the Bank of Moscow case

Neue Zürcher Zeitung

The effort to forestall the bankruptcy of the troubled Bank of Moscow became the largest rescue package in the brief history of the Russian banking sector. However, question marks hang over the rescue package launched in July. The state-owned VTB bank claims that the former managers are at fault. The former Bank of Moscow CEO is defending himself against allegations of credit fraud. The conflict lays bare the weakness in the overall Russian banking sector.