(Adds bank owner's comment, other details)
PRAGUE Oct 11 The Czech central bank said ERB,
a small Russian-owned bank operating in the Czech market, had
failed to meet obligations and depositors could claim
compensation for losses from the national deposit insurance
ERB, which is 93 percent owned by Russian businessman Roman
Popov and focuses on business with Russia, could no longer meet
its obligations to depositors, the central bank said on Tuesday.
Popov said that he was trying to improve the situation of
the bank, but the central bank's step had blocked his effort.
"It is an artificially created bankruptcy. I am shocked by
what has happened," he told Czech Hospodarske Noviny daily
paper, adding the bank had enough resources and it was working
to meet requests of the regulator.
The central bank declined to comment further.
One of the smallest players in the Czech market, with assets
of 4.97 billion crowns ($206.23 million) at the end of June, ERB
has been banned by the central bank from taking deposits and
providing loans since March.
The central bank announcement triggers payments to
depositors from the country's compulsory deposit insurance
scheme, which fully guarantees deposits of up to 100,000 euros.
The national deposit guarantee scheme said it expected to
pay out about 3.6 billion crowns in compensation.
The Czech banking system as a whole has maintained
profitability and required no bailouts during and since the
global financial crisis, and ERB's failure does not point to any
wider systemic problems.
Regulatory filings showed ERB bank had total loans of 1.78
billion crowns at the end of the second quarter, of which 940
million crowns - more than 50 percent - were in some type of
default. That included 649 million crowns' worth of loans booked
as loss, the worst credit quality category.
The bank reported return on average tier 1 capital of -53.68
percent and a loss of 120 million crowns at the end of the
($1 = 24.0990 Czech crowns)
(Reporting by Jan Lopatka; Additional reporting by Petra
Vodstrcilova; Editing by Catherine Evans)