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Kyrgyzstan is to sell 90% of Zalkar Bank, the successor to the country's former largest bank AsiaUniversalBank (AUB), to a Russian holding company, Bishkek announced on April 26. The swift sale of the bank follows a recent call from the IMF for urgent action, while increasing Russian dominance of the Kazakh economy.

Officials from Kyrgyzstan's Agency for Reorganisation of Banks and Debt Restructuring (DEBRA) said that a decision to sell at least 90% of Zalkar to Russia's Investment and Trade Business Holding company was made during a Kyrgyz-Russian intergovernmental commission that took place in Moscow on April 22.

After several previous attempts to auction off Zalkar failed, the Russian company bid to take over the company in an auction on April 15. According to DEBRA, the Russian company was the only bidder, 24.kg reports.

Kyrgyzstan's central bank is currently investigating the Russian bidder, and will make a final decision on whether the deal can go ahead in the near future. Under the terms, the remaining 10% of the bank's shares will be handed over to the State Property Management Fund of Kyrgyzstan.

AUB was formed from the merger of AsiaUniversalBank and Kyrgyzpromstroibank in 2009, and was Kyrgyzstan's largest bank until the April 2010 revolution. It was one of several banks nationalised by the interim government that took power after former President Kurmanbek Bakiyev was ousted, with incoming officials claiming the bank was closely linked with the former president's son Maxim Bakiyev.

Bishkek says that on April 7, 2010 $234m was withdrawn from AUB correspondent bank accounts, reducing the bank's assets by 40%. Kyrgyzstan's central bank also said in May 2010 that a large amount of AUB's assets were fictitious.

The bank was nationalised on June 7, 2010, with the government planning to provide a KGS3bn ($63m) bailout package. However, just days later, large-scale ethnic violence erupted in south Kyrgyzstan, after which the government could no longer afford to inject the capital. Instead, AUB was restructured and split into a "good bank" - named Zalkar Bank - and "bad bank".

Bishkek was criticised by an International Monetary Fund delegation in mid April, which warned macroeconomic conditions in the country have deteriorated. The IMF mission "urged the authorities to sell or liquidate Zalkar bank swiftly".

In addition to trying to sell Zalkar, DEBRA has been attempting to recover funds owed to AUB. The agency filed a KGS3bn claim against AUB's former management on April 8. DEBRA said in an April 24 statement that the claim was "to seek to recover what DEBRA considers to be misappropriated funds."

The claim, filed with the October Regional Court of Bishkek, names several defendants including AUB's former chairman Mikhail Nadel and other former top managers. Three US senators - John Bennett Johnston, Donald Riegle Jr and Robert Dole - who were members of the AUB board of directors were also named. DEBRA's statement says that although each senator received $175,000 a year plus share options, "during 2009 and 2010... Senators Johnson and Dole attended board meetings once, and Senator Riegle did not appear at all."

With the expected takeover of Kyrgyzstan's one-time largest bank, Russian dominance in Kyrgyzstan's economy has increased further. Russia is co-financing two of Kyrgyzstan's largest hydropower projects, Kambarata and the Upper Naryn Cascade, and Gazprom is expected to sign a deal to acquire Kyrgyzstan's gas distribution network KyrgyzGaz by September.