Budapest-based Russian "spy bank" in critical situation

The Budapest-based International Investment Bank (IIB), almost 50 percent of which is owned by Russia and 25.27 percent by the Hungarian state and is regularly referred to as "the spy bank" has used up almost all of its liquidity reserves, Hvg.hu reports. According to the newspaper, without its funds which have been frozen under the sanctions imposed in the wake of the Russian-Ukrainian war, "the bank is at risk of insolvency or will be forced to restructure its bonds as early as May 2023".

A senior executive sent a "rather gloomy", "ominous" letter to the bank's management in mid-December. This letter, obtained by Hvg.hu, testifies that after Russia attacked Ukraine last year, Euroclear has blocked tens of billions of dollars of securities held by Russian individuals in Europe alone, as well as the IIB's funds. In the letter, the bank's chief predicted "such a severe deficit for the first quarter of this year that even the sale of the loan portfolio would not be enough to make up for it".

In short, the IIB is in serious trouble because of the freezing of funds. In October last year, it appeared that recovering the frozen assets may be possible, but the Belgian Finance Ministry intervened, saying that several members of the bank's board of directors 'have links with the Russian government, which has a controlling influence on IIB'.

The bank was also targeted with a cyber-attack on 17 February, when hackers obtained several letters and other bank documents, which the IBB said were fake, but Hvg.hu says are very much genuine. One of the documents is a letter in which Hungarian Minister of Economic Development, Márton Nagy is lobbying the Belgian Finance Minister to unblock the IIB's funds. Neither Nagy nor the Belgian Ministry of Finance have responded to the newspaper's question as to whether this letter is genuine by the time of publication of this article.

The financial difficulties of the International Investment Bank may also be of concern to the Hungarian government because the Hungarian state is the bank's second majority shareholder. In fact, after Bulgaria withdrew from it in February, Hungary is now the only remaining EU member owner. Other owners include Russia, Cuba, Mongolia and Vietnam.

Among the documents published by the hackers is a draft that envisages the inclusion of Serbia and an increase in Hungary's stake in the bank. Hvg.hu recalls that this scenario is not so far fetched after all, as after the war in Ukraine started, Hungarian Foreign Minister Péter Szijjártó himself said that following the withdrawal of the other Central and Eastern European states, Hungary may further increase its contribution in the Budapest-based organisation. They add, however, that when asked about the IIB at the government briefing on Saturday, Gergely Gulyás, the Prime Minister's Chief of Staff responded by saying: "I don't know if it is possible to save" the bank, which is "in an extremely difficult situation".