UPDATE 1-Bank of Russia says preventing bankruptcy of Ukraine bank's Moscow unit

Fri Mar 7, 2014 9:34am EST

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By Jason Bush and Megan Davies

MOSCOW, March 7 (Reuters) - Russia's central bank is taking steps to prevent the bankruptcy of the Moscow subsidiary of Ukraine's Privatbank, the Bank of Russia said on Friday, after Privatbank accused it of putting Moskomprivatbank under administration for political reasons.

The central bank said it was taking the measures under a law on banking system stability which enables the state-run Deposit Insurance Agency to provide financial assistance to banks, acquire their property and liabilities, acquire shares, and sell collateral.

The Deposit Insurance Agency has been appointed as the bank's temporary administrator, the central bank said.

It added that, "Moskomprivatbank continues to work in a normal regime, all clients, including depositors of the bank, can use its services."

The central bank had suddenly announced on Thursday that it had placed Moskomprivatbank, predominantly a retail bank with about $1.4 billion of assets, under temporary administration.

Privatbank, Ukraine's largest bank, is a part of Privat group, co-founded and co-owned by Igor Kolomoisky who was appointed by Ukraine's Acting President Oleksandr Turchinov as governor of Dnipropetrovsk region, Kolomoisky's birthplace, a few days ago.

On Tuesday Russian president Vladimir Putin called Kolomoisky "a unique impostor", accusing him of violating a contract with Russian businessman Roman Abramovich.

"And such a scoundrel was made a governor of Dnipropetrovsk region," the Putin told a press briefing in which he talked about widespread corruption in Ukraine.

"Common sense and logic says there is probably a connection between the events in Ukraine and this move," said one analyst who spoke on condition of anonymity.

"It could be a signal to him (Kolomoisky) - political games," said the analyst. "It could be a political decision or pressure on the Ukrainian oligarch to force him to be more negotiable in other deals."

In a statement on Thursday, Privatbank's chairman Alexander Dubilet said that the Bank of Russia's actions "don't have economic or other objective causes and are exclusively the result of political tensions in relations between Russia and Ukraine".

Dmitry Barbayanov, chairman of Moskomprivatbank, later said in a statement: "We are sure that the central bank will throw its weight behind Moskomprivatbank and won't allow politicians to break the normal regime of client service."

Analysts said it was an unusual move by the central bank to put a bank into administration without withdrawing its licence.

"It is a very weird case from a legal point of view and because of the absence of previous cases," said one.

The Bank of Russia declined to comment further about its actions.

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