The People’s Bank of the Republic of Tuva announced last Tuesday the board’s decision to issue new shares, Kommersant daily reports. The bank has only 2 weeks to outline and implement recapitalization plan that implies raising the bank’s authorized stock from 97 million roubles ($ 3.1 million) to 180 million roubles ($ 5.7 million) by 1 January 2012. Taking into consideration the time that the recapitalization usually takes, that is 3-6 months, it is likely that the bank, in the past owned by former Tuva representative in the RF parliament Sergei Pugachev, will lose its operating license.

The bank’s shareholders have not yet agreed on the recapitalization terms. “The sides agreed that the recapitalization should be implemented by the side which is on the shareholders’ register [at the moment of recapitalization]”, said a source close to the bank.

The bank has been in the center of the conflict of interests ever since previous controlling shareholders sold their stake.

One of the bank’s shareholders - government of Tuva, a Russia’s region on the boarder with Mongolia - said it had no plans to sell their shares. “We do not even consider selling our shares,” said local state property minister Orlan Dugur-Syuryun. “We want to get control of the bank”. He added that the ministry would file a lawsuit against a firm called Tsentr Realizatsii that hold e-auction for a controlling stake in the bank and would seek reauctioning of the bank.

The analysts say it is very unlikely that the sides will reach an agreement until the New Year, which means the bank will lose the license. A corporate conflict that hinders additional issue of shares is a rare case for Russian banking system. State participation in the bank’s capital worsens the situation, the experts say. “It is easier for private shareholders to agree on the recapitalization. For them it is important to not lose the bank, while the state will never buy additional shares for unprofitable price,” says Evgeny Trusov, head of bank consulting and buying and selling banks department in NEO Tsentr advisory firm.