In 2013 - 2014, the Central Bank withdrew a license from many Russian banks. This not only caused panic among depositors, but also hit other credit organizations. Clients began to withdraw funds even from financially sound banks. Then for the first time in a long time, the word "reorganization" sounded very loud. What does the procedure for rescuing a credit institution by the state mean? In this article, you will learn about bank resolution.
Definition
A set of procedures aimed at restoring financial condition is a bank reorganization. What does it mean? If it is possible to avoid the bankruptcy of a financial institution, then the management of the bank will be transferred to the Deposit Insurance Agency (DIA). Remediation is beneficial to customers who have made a deposit, since it allows you to save all invested funds. If a license has been revoked from a bank, then DIA can reimburse only part of the deposit amount. But if there is an investor who will buy out the entire lending institution, then legal entities will also win, as they can continue to be serviced by the organization. The new owner will use the full range of measures for the restructuring of accounts payable and disposal of illiquid assets. This is what bank resolution is. But it is carried out quite rarely. If a hole in the balance sheet corresponds to the volume of assets, then nothing will be done.
Remediation is carried out if:
- the bank is significant for the economy of a country or a specific region ("Solidarity" in the Samara region);
- the credit institution is stable, but faced with a temporary lack of liquidity due to the panic of the population (Gazenergobank).
The decision is made by the Central Bank of the Russian Federation. Further, the Deposit Insurance Agency (DIA) carries out temporary management of the bank until its assets are transferred to another financial organization. She will also be allocated funds to restore solvency and payment of obligations. Sometimes DIA manages to restore a problem bank on its own. But most often you have to look for investors. It must be a reliable financial organization with positive experience of recovery in the past. In total, a restored bank can receive capital from three sources: from the Central Bank, DIA and a private investor. This is what bank resolution is.
Positive sides
The recovery procedure helps individuals and legal entities to keep deposits in full. In the event of bank bankruptcy, enterprises will lose all their savings, and ordinary citizens will receive only amounts up to 700 thousand rubles. Remediation allows you to fully restore the activities of a financial organization. Additional capital makes it possible to save jobs and quickly eliminate current problems.
What is the benefit of the investor
The state saves only strong or regionally important banks. The development of the business and the increase of confidence in the investor by local institutions is greatly facilitated by bank reorganization. What does it mean? In exchange for the invested funds, the financial institution receives a part of the capital, the organization’s product line, infrastructure facilities and its customer base. The investor will be able to use all these data for synergy with his other activities.
Procedure
The reason for the reorganization is a real opportunity to restore the solvency of the bank. The healing procedure should not exceed 1.5 years. If within three years another bankruptcy petition has been filed, the bank cannot be re-sent for reorganization.
After satisfying the application, the arbitration court announces a competition for participation in the rehabilitation procedure. The main directions for restoring the bank's solvency: postponement of the repayment of issued bonds, with a decrease in them%, issue of new securities, the provision of additional loans, the extension of previously received loans, etc. The pre-emptive right to participate in reorganization is granted to creditors, the owner of the bank and its employees.
Bank reorganization: what to do to depositors
It is important to remember that during procedures to restore the financial condition of the organization, all customer funds will be saved. The Bank receives additional capital, which should be aimed at eliminating all current liquidity problems. Earlier in schools, strong students helped the weak. Now the same practice is applied in the banking sector. Therefore, the most important thing in this situation is not to panic. Even if the management stated that it temporarily “freezes” all funds, depositors will be able to return the money, but it will take some time.
It is important to distinguish between the concepts of "reorganization" and "bankruptcy." In the second case, the return of citizens' funds in the amount of up to 700 thousand rubles is guaranteed by the DIA. According to the Law “On Insurance of Deposits of Individuals with Banks of the Russian Federation”, payments must begin 14 days after the revocation of the bank’s license. But in practice, much more time will pass. And the point here is not even that the DIA will not be able to immediately return deposits with the promised high interest. Much more time will be spent on analyzing the financial condition and compiling a register of investors.
Companies and entrepreneurs most likely will not be able to return their deposits. According to the Federal Law "On the insolvency of credit organizations", such claims are satisfied after payment of obligations to individuals, the DIA and the Central Bank, provided that the financial institution still has funds. Therefore, it is so important that an investor appears who can restore the solvency of the organization.
Although many licenses of banks were revoked last year, the Agency still has a reserve of funds. If the money runs out, the Central Bank will provide additional financing by issuing pre-national currency. The devaluation of the ruble can greatly impact the owners of foreign currency deposits. The amount of their deposit, including interest, will exceed 700 thousand rubles. The owners of ruble deposits, although they can return their savings, but by that time they will be greatly depreciated. Therefore, in this case, we can advise the following: at the first hints of a strong currency devaluation, contact the bank’s branch with a request to “split” your deposit into several parts. Better yet - re-register part of the contribution to a relative. You can’t be denied a cashless transaction, since in fact you are not taking the currency from the bank.
What will happen next
Upon completion of the rehabilitation process, the new investor independently decides whether to maintain the brand, business model and team of employees or to develop everything from scratch. Most often they change. The Central Bank cannot influence this decision in any way.
Bank Remediation 2014
In the past year, the news about the introduction of an interim administration in one of the oldest credit institutions in the country caused the most panic. We are talking about Baltic Bank OJSC (St. Petersburg). Remediation of the financial institution began in August 2014. To restore liquidity, the Central Bank first allocated 10 billion rubles. DIA held a competition to participate in the recovery process of the credit institution "Baltic Bank". Remediation has been underway for five months. The new investor of Alfa-Bank OJSC manages the process. During this time, many customers have already experienced positive changes in the organization. The brand and business model have remained unchanged. But customers can now withdraw funds from an additional 5,000 Alpha ATMs without commission. The network of offices will not be rebuilt quickly. Management also assured that deposit and loan agreement rates will remain unchanged until the end of their term. Earlier, Alfa-Bank participated in the recovery of the Northern Treasury. After recovery, this financial institution was liquidated and merged with the investor. The same fate awaits the Baltic Bank. Remediation will be carried out at the expense of budget funds in the amount of 57 billion, which the investor received at a preferential 0.51%.
Last news
November 18, 2014, it became known that the DIA accepted the functions of interim administrator in the management of the ROST Group. In addition to the credit institution of the same name, it includes four more institutions: Kedr, Akkobank, SKA, Tveruniversalbank. In October 2014, the Central Bank began assessing the financial condition of the holding, the results of which indicated the need for measures to prevent bankruptcy. Now DIA is developing plans for the rehabilitation of each of the five credit institutions. That’s what a reorganization of a banking group is.
Summary
If the bank plays an important role in the economy of the country or is faced with a temporary lack of liquidity, then the Central Bank can begin the process of improving the organization. In this case, the DIA assumes the role of a temporary administrator. In parallel with the financial analysis, a competition is announced for investors who could restore the solvency of the organization. This is what bank resolution is.