Hand over the dough or DIA…

How the Deposit Insurance Agency (DIA) wrings money out of Russian citizens, while its head Yuri Isaev puts a brave face on a bad job


The Russian Deposit Insurance Agency (DIA) has found itself in the middle of a very serious scandal, caused by the Agency itself. It has been revealed that the DIA used judicial proceedings massively to rob former depositors of now bankrupt banks of their deposits, only paying the minimum amount covered by insurance. Courts have been issuing rulings in favour of the Agency, which resulted in depositors, including pensioners, being robbed of their last savings. Things went so far that citizens went to seek justice from the president himself. Meanwhile a “spicy” detail came up, according to the newspaper Versia.

Your deposits are our deposits

Recent media publications were a shock even for the battle-scarred and hard-boiled Russian banking market. The DIA, which is by definition supposed to protect the depositors’ interests, not only neglected the latter, but purely and simply began to rob banks’ customers. It is difficult to find a different verb for that which happened. It appeared that the DIA was massively – and successfully – engaged in legal proceedings against customers of banks whose license had been withdrawn. For some reason the State corporation DIA is convinced that those quite ordinary natural persons acted in bad faith when withdrawing their funds shortly before the collapse of a given credit institution. The banks concerned in the first place are Tatfondbank, Intekhbank and the Military-industrial Bank (Voenno-promyshlennyi bank). All three have long disappeared off the face of the Earth, but the passions they have caused are still raging.

So, imagine that you are the client of a bank: a big one, perhaps even one holding State funds. Imagine that you have three million rubles on your account. Let us suppose that these are your savings, amassed over many years of honest work, or else income received from the sale of an apartment. You keep an eye on the country’s banking market, and so one fine day you read in a business publication that storm clouds are gathering above your bank. Or rather, that the bank in question has gathered those clouds itself, because it is a secret for no one that the owners and top-managers have been investing your money in toxic assets, giving out obviously un-repayable loans and so forth. This is common knowledge, this is what people in your town talk about and journalists write about in their papers. You realise that should the bank collapse, you would only get back 1.4 million out of your three million, as provided for by the law (the maximum insured amount). Naturally, you hurry to the bank and withdraw all your funds before it is too late, in order to put them to safety in a different bank or under your very own mattress. And just when you feel relieved for having recovered your savings, there comes a gentleman from the State institution called DIA and takes all your money, cynically and brutally.

No pity for pensioners

Those white-collared thieves need no balaclavas, they brandish no guns, they do not shout: “give us the money, or we will kill you!”. They proceed in a civilised manner: they go to court and file a claim against depositors who had withdrawn their deposits shortly before the bankruptcy. Their logic is infallible: the DIA is in charge of sorting through the bankrupt bank’s assets in order to recover on behalf of the State whatever had been lost or stolen. If the person was able to withdraw funds in time, it means that he or she held insider information; in other words, they knew the bank was about to collapse and misused such information! Courts are entirely on the DIA’s side. The fact that the amounts involved are ridiculously small (by the DIA’s standards) does not seem to trouble them. Nor does the fact that the bank’s imminent death was public knowledge. Cases all look the same, and so do ten-to-fifteen-minutes court hearings. The DIA has filed hundreds of claims to date, sometimes over one year after the withdrawal occurred. The customer will have had time to spend those funds a thousand times, for example on real estate, for which he had been saving for years. Such a client counts a creditor and may claim the entirety of his deposit, but he will only be given 1.4 million rubles, as mentioned above. But this might happen at a later stage, whereas the DIA demands to be paid immediately, in application of the court’s ruling. Should you fail to pay, bailiffs will come, armed with a writ of execution, and will auction away your last property, which might be, for instance, your long-awaited flat. Or they will simply confiscate savings that a person may have been putting aside for his or her old days: it has become known that pensioners were not spared. By the way, it must be said that those citizens could be considered lucky. Because the penal code actually contains a separate article on insider’s information. “Use thereof with the purpose of performing transactions involving financial instruments” is punishable by up to four years in prison. A deposit is as good a financial instrument as any other; our judicial system should have no trouble proving that a given person withdrew the funds intentionally, thereby causing prejudice to the DIA. Once this is done… welcome behind the bars! But our Agency is no blood-thirsty monster, it does not seek to put people in prison, it only needs their deposits. All the same, if the institutions keep moving in that direction, even such gore scenarios might materialise. Nothing extraordinary, mere Russian reality.

Trust irretrievably undermined

The scandal around this story ended up becoming quite serious. Depositors who have been robbed of their money began to collect signatures for a letter addressed to the president. Given that journalists are greatly interested in this topic, there is little doubt that the letter will reach its addressee. We might also venture to suggest that the chair under Yuri Isaev is beginning to wobble. Besides, the people’s ire is one thing, but the bankers, too, have made a declaration against the Agency, stating their intention to file a claim before the Supreme Court, to contest the legality of the judicial decisions. Here is, indeed, a rare case of solidarity between banks and their clients; but then the DIA managed to steal money from both.

Depositors were only deprived of their deposits. But the banks, on their side, lost the trust of their customers, and, therefore, the latter’s money. People are perfectly aware of what is going on in the financial industry; they watch the country’s biggest banks collapse; they see how the Central Bank (as in the case of Tatfondbank) withdraws the licences even of banks holding State funds. All that ordinary citizens can do, is to keep their money in the largest State institutions, or just buy dollars for the entire amount and hide them somewhere far. Finally, a cherry on the cake for the DIA’s head: the Agency’s activity attracted the attention of parliamentarians, who added to the media uproar by referring the case to the Central Bank.

Expropriators in sheep’s clothing

Yuri Isaev was quick to justify himself, saying that claiming compensation from the clients of bankrupt banks is standard international practice. Besides, he said, the Agency is not contesting all of the transactions indiscriminately. “They are attempting to incriminate us, saying that we have gone mad and have begun aggressing depositors”, the top manager complained. This actually deserves a comment: Dear Mr Isaev, media do not “incriminate”, they only inform. Incrimination is something that courts do, so why make haste and use such terms ahead of time? Furthermore Mr Isaev contradicts himself. According to him the DIA filed 500 claims in relation to Tatar banks, some 230 to 240 of which should be withdrawn. So when half of the claims are abusive, it does not make the whole approach “indiscriminate” in Mr Isaev’s eyes. Obviously, this word too is problematic for him.

Finally, one more story told by Tatarstan journalists. Referring to information supplied by depositors, they announced that not only ordinary citizens hurried to save their money from the sinking Tatfondbank and Intekhbank, but so did the Central Bank. The regulator also withdrew (!) its funds, except that in its case it was not mere millions, but 15 billion rubles. Moreover the DIA allegedly complained and the Central Bank returned a whole 58 million to the Agency. But if it was so, then why did the Agency not claim the entire amount from the regulator, in court? Why having failed to act in the same manner as towards an ordinary creditor? But this is a silly question. Everyone knows that it leads to no good to bite the hand that feeds you. Trampling petty little depositors, stealing one million here and another there, is a different matter.

Mr Isaev is probably right: this does not look in the least like madness. It looks much more like a business plan.

Anton Volin