Vostochny Bank Reserves Fell Below Critical Minimum Last Month: Central Bank

The capital adequacy ratio of Russia’s Vostochny Bank briefly dipped below a critical level last month, the country’s central bank warned on Friday, according to Reuters.

The situation is seen as a sign of balance sheet problems at the lender amid a controversial battle for control between shareholders.

The bank’s common equity adequacy ratio fell below a key threshold from May 31 to June 5, the central bank said in a statement on Friday, without elaborating specifically what that threshold was.

Vostochny Bank is Russia’s 36th largest lender by assets. The bank is controlled by businessman Artyom Avetisyan and private equity group Baring Vostok, whose U.S. founder and other executives were arrested on embezzlement charges earlier this year.

Michael Calvey, who is being held under house arrest in Moscow, and other group executives deny the charges against them and say the case is being used to pressure them in a dispute over control of the bank.

Avetisyan’s company, Finvision, became a majority shareholder in the bank last month when Baring Vostok ceded a 10% stake in it.

Vostochny Bank confirmed the central bank statement, saying that it concerned a threshold used in regulating subordinate loan agreements. It said the bank was taking action to restore capital levels and hoped to do so by the end of August.

Russia’s central bank began clearing up its banking sector in 2013 and, under governor Elvira Nabiullina, it has shut down nearly 500 banks.