People's Credit Bank, whose problems reached its zenith in 2014, began to exist in 1993. Its first name, Sharq, was already replaced in 2000 with People's Credit. Back in 2008, a financial institution intensified the process of changing the legal form. The limited liability company was modernized into a joint-stock company in 2009. Already in December 2010, Narodny Credit Bank, which was previously positively reviewed, acquired a 25% stake in Bank of Khakassia. A little later, the number of shares was increased to 76%. By 2011, the license of the financial institution of Khakassia was fully revoked in connection with the merger. The Narodny Credit Bank, whose problems began due to low liquidity, was controlled by the Antonov family.
A brilliant past
The bank was licensed by the Central Bank and was a partner of Moscow. The financial institution was a member of the Association of Russian Banks and a member of the Deposit Insurance Structure. The officially registered authorized capital of the enterprise was 1.8 billion rubles. Equity was equivalent to $ 4.2 billion. The Institute was an associate member of the international payment systems VISA Inc. and Mastercard WW. Previously, a rating agency has always confirmed the solvency of an institution and assigned it to category A in accordance with the national scale.
Just two years before reports began to appear that the Narodny Credit bank was closing, the organization was a winner of the Financial Olympus award. The structure of the regional network included 9 main branches and about 35 additional offices. There were times in the history of the institute when it did not even fight for a tender from the state. A tight lending policy in the best of times made it possible to achieve colossal liquidity indicators.
What happened to the bank recently
In the last year, the financial institution worked on the instructions of the Central Bank, which limited the attraction of deposits of individuals. This order was received back in July 2013. Also, in addition to restrictions, the Central Bank of the Russian Federation strongly recommended that all reserves be activated in order to fulfill obligations to depositors. Attention was drawn to the fact that the financial institution itself has never pursued an aggressive policy on attracting deposits. Such measures were taken as a result of the institution's low liquidity.
First signals of trouble
The first malfunction was due to the fact that the Bank "People's Credit" began to issue deposits outside the regulations. When depositors began to come for their deposits, they were informed of the daily limit of the institute in the amount of 25 thousand rubles. People were not able to get their full contribution in one day. Had to walk for weeks. Nevertheless, in comparison with other financial institutions, which refused to make payments at all, on the eve of bankruptcy, Narodny Credit Bank, reviews of which always had a positive connotation, fulfilled its obligations almost in full. Despite the crisis, the call center staff consistently answered all questions and provided each client with comprehensive information. In order to avoid material collapses, bank employees constantly informed customers that some payments were suspended and most of the accounts were not serviced.
Attempts to rectify the situation.
In an attempt to rectify the situation, Narodny Credit Bank OJSC is trying to increase liquidity by lowering interest rates on loans. The “popular” program has become incredibly affordable. In the presence of a pledge or guarantor, the interest rate on loans with a duration of up to one year was only 16% per annum. If the loan lasted from one year to three years, the interest rate would be 17% per annum. With a loan duration of more than three years, the interest rate on it was set at 18%. Loans were available for customers who did not have any collateral or guarantor. However, in this case, the interest rate rose to 18%. With a partnership period of 1 year to three years, the interest rate could be 19% per annum. If the client decided to take loans for a period of five years, the interest on the loan could be 20%. The offer was valid in all branches, including in a city such as Abakan. People's Credit Bank did not save even such a desperate decision: the liquidity situation has not changed.
What was the basis for the decision to liquidate the license?
The decision to liquidate the license was made based on the reports of the new administration. The information indicated that Narodniy Credit Bank was far from having small problems due to a decrease in liquidity of up to 50%, and the instant liquidity ratio was about 15%. The financial institution did not apply for state assistance due to the fact that at that time negotiations were being held with investors who intended to make a contribution of $ 100 million.
Beginning of the End
After receiving messages to the NBU from customers of OJSC “Bank Narodny Credit” about the impossibility to fulfill their obligations, a temporary administration was appointed to the financial institution. Starting October 1, 2014, the interim administration conducted a financial analysis of the situation. In fact, a total loss of personal capital by the administration was recorded. It was decided that it was impossible to restore the solvency of the structure, and any injections from the state would not make sense. The results of the assessment of the situation by the provisional administration became a powerful basis for the termination of the activities of such a financial institution as Narodny Credit Bank. A license is revoked only if the institution is no longer able to fulfill all its obligations to depositors and creditors within a year, even with financial support from the government. The circumstances exactly corresponded to the law.
Work rolled downhill
Immediately after the brilliant liquidity indicators, Narodny Credit Bank began to experience far from small problems, despite the conservatism of the activity, which was expressed in servicing housing and communal services projects. Loans to individuals accounted for only 3% of the loan portfolio, dominant in assets with a share of 70%. Funds of individuals accounted for only 23% of liabilities. The residual funds in corporate accounts of customers accounted for only 22% of the capital. Shares and bills of domestic banks accounted for only 19% of net assets. At the interbank institution in most situations, it acted as a donor. With a high degree of concentration of assets with liabilities, the enterprise had low profitability.
Statistical decline
According to statistics from the National Rating Agency, Narodny Credit Bank, whose license is revoked due to low liquidity, in 2010 received a net profit of 20.9 million rubles. In the previous year, this figure was significantly higher and amounted to 107.2 million rubles. This situation lowered the bank to 149 position in the rating and attracted the attention of the Deposit Insurance Agency. Decrease in indicators was observed in all departments and small branches, the city of Abakan was no exception. Narodny Credit Bank began to lose ground, although outwardly nothing portended a disaster.
Rational end to the story
People's Credit Bank is closing down for a reason. In addition to low liquidity, the interim administration was able to find out that the price of the assets of a financial institution is not more than 14.121 million rubles. As for obligations to depositors and creditors, they amount to about 16 854.8 million rubles. The reason for this discrepancy is hidden in the issuance of previously bad loans, the amount of which amounted to 10.2 billion rubles. Moreover, the fact of the purchase of illiquid bills in the amount of 1.8 billion rubles from companies whose addresses indicated in the documents did not correspond to reality was recorded. There was an alienation of property of a financial institution in the amount of 0.2 billion rubles. Information was received from the regulator that the management carried out criminally punishable operations. The result of such manipulations is more than obvious, and a positive development of events was not worth expecting. Despite the fact that the majority of depositors partially returned their savings, there are still quite a large number of those whose losses will be compensated by the insurance agency in the manner established by the regulations.