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The Central Bank of Russia revoked another three banking licences on December 13, as its campaign to reduce the number of banks in the country continues.

The CBR pulled the licences of Smolensky Bank, Moscow-based Project Financing Bank and Investbank, the latter ranked seventy-ninth by asset size. All the banks had difficulties in serving clients over recent weeks and had asked the regulator for measures to stabilize liquidity, including the allocation of a Lombard loan.

According to the regulator, the banks violated several norms and laws, including fraudulent financial reporting and inability to satisfy creditors. The CBR also noted the low quality of banks' assets. The banks are all members of the deposit insurance system, which guarantees the redemption of deposits of up to RUB700,000. Any deposit funds over and above that level will be added to the banks' creditor lists.

Deposits at nvestbank amounted to about RUB40bn as of November 30, which is comparable to the RUB47bn that was held by Master Bank, the last major retail bank to fall victim to the CBR's push to reduce the number of small banks across the country. Smolensky Bank keeps deposits of RUB14bn.

Project Financing Bank's shut down was almost inevitable, as Master Bank provided its processing services. After the latter's licence was revoked in late November,

Project Financing Bank clients rushed to grab their cash, which led to troubles with liquidity.

UralSib analysts believe that the latest license revocations are likely to further tighten liquidity on the domestic market in the short term, and add pressure onto the ruble. "Neither bodes well for the Russian financial market," the analysts worry.