By Elena Fabrichnaya, Oksana Kobzeva and Alexander Marrow
MOSCOW (Reuters) -Payment services used by Russians to transfer money overseas were knocked offline on Wednesday after the central bank revoked digital bank Qiwi’s licence, sending its Moscow-listed shares plummeting almost 50% to a record low.
The central bank, which has taken regulatory action against Qiwi five times in the last year, said Qiwi Bank had engaged in high-risk operations, systematically violating requirements on anti-money laundering and terrorism financing legislation.
Nasdaq-listed Qiwi, on of Russia’s largest payment services provider, said it was aware of the revocation and that temporary administrators were currently working at the bank. It said it was looking into the matter and that Qiwi Group’s business, which is not related to Qiwi Bank, was operating as usual.
Qiwi, a Russian analogue to PayPal, had 29 million users at the end of 2022 and 13.8 million active wallets. Users were unable to withdraw funds from wallets and Qiwi’s Contact payment system, used by many to transfer funds overseas, stopped working.
Other cross-border payment agents remained operational.
Russia’s Deposit Insurance Agency (ASV) said compensation payments would start being paid by March 6. According to Qiwi Bank reports, the ASV’s liability is estimated at 4.6 billion roubles.
Qiwi Bank is a member of Russia’s deposit insurance system and up to 1.4 million roubles per depositor should be returned as a result.
E-wallets are not insured, but the central bank said Qiwi should have enough assets cover those funds.
COLLATERAL DAMAGE
The central bank’s move inflicted wider collateral damage on Russia’s financial system. Raiffeisenbank, the Russian unit of Austria’s Raiffeisen Bank International, said payments for mobile services were temporarily unavailable as a result.
MetalloInvestBank said mobile and internet payments were temporarily unavailable on its mobile application, through online banking and at ATMs.
Tochka Bank also reported issues.
“Qiwi Bank did not take effective measures to reduce risks in its activities, despite the Bank of Russia’s active supervisory work, and continued conducting high-risk operations,” the central bank said.
Qiwi’s Moscow-listed depositary receipts were down 41.5% as of 1320 GMT having earlier fallen almost 50% to a record low.
The sharp drop prompted the exchange to repeatedly adjust the lower boundary for the shares and to hold a discrete auction of shares, a tool used to ease extraordinary volatility and allow a base price to be established.
Trading of its Nasdaq-listed American Depositary Shares has been suspended since soon after Russia sent troops into Ukraine in February 2022.
The company said in January it had entered into an agreement to sell its Russian assets and had thus completed a restructuring process. It said the sale of the Russian business was expected to secure its continued listings on both the Nasdaq and Moscow Exchange.
(Reporting by Oksana Kobzeva and Elena Fabrichnaya in Moscow, Alexander Marrow in London; editing by Sharon Singleton and Jason Neely)
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