MOSCOW: Bank of Moscow, recently taken over by VTB, on Wednesday denied reports that Russia's central bank had told it to hold up to $7 billion more in reserves against possible loan impairments.
Bank of Moscow, which had 116 billion roubles ($4.2 billion) of equity capital at the end of 2010, said in a statement that it had not received any such requests from banking regulators.
‘The central bank's audit has not ended,’ it said.
RIA news agency quoted an unnamed source on Tuesday as saying the central bank had ordered Russia's No.5 lender to allocate an extra 180-200 billion roubles to loan-loss reserves.
The source quoted by RIA was not aware which specific loans need to be additionally covered.
Bank of Moscow, a cornerstone of Moscow's finances under former Mayor Yuri Luzhkov until he was ousted last year, has been at the centre of a takeover battle in which VTB prevailed over former CEO Andrei Borodin, previously a major shareholder.
Analysts said state-controlled VTB, Russia's second-largest bank, might not have been aware of all Bank of Moscow's operations before it paid $3.5 billion for a stake of nearly 50 percent stake in early February.
‘I was not very happy about VTB's deal with Bank of Moscow. VTB has got access to ... its documents only a short time ago,’ said Rustam Botashev, an analyst with UniCredit Securities.
VTB's chief financial officer Herbert Moos on Wednesday declined to comment on the possible reserves hike but said VTB would not include Bank of Moscow's loan portfolio in its next quarterly consolidated results.
Andrei Kostin, VTB chief executive and now chairman of the board at Bank of Moscow, told Vedomosti business daily that VTB had some ‘complaints’ against Bank of Moscow's former management in terms of the loan book.
‘But the scale of the problem is much less and does not endanger the lender's stability,’ Kostin was quoted as saying.
VTB had sought majority direct control but faced resistance from Borodin, who recently sold the roughly 20 percent stake he and his partners owned to businessman Vitaly Yusufov.
VTB officially put protege Mikhail Kuzovlev at the helm of Bank of Moscow last week. Moos said on Wednesday the bank would not buy any additional stakes in Bank of Moscow this year.
The central bank could not be reached immediately for comment.
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