| The Ministry of Finance is ready to simplify the procedure for merging banks The government, which has been promising for several years to simplify bank mergers and thereby stimulate what it believes is the necessary consolidation of the banking sector, appears ready to get down to business. Yesterday, the deputy head of the financial policy department of the Ministry of Finance, Vladimir Lukov, told Interfax that his department had agreed with the Central Bank and the Ministry of Economic Development and Trade on a bill that would allow banks to merge without fear of ruin and the need to pay creditors ahead of schedule. However, bankers, who have long dreamed of such changes, do not believe in a quick solution to problems.
Banks have long been asking government agencies to simplify the procedures for mergers and acquisitions, noting that due to bureaucratic barriers, there has not yet been a single classic banking merger in Russia. First of all, this is hampered by the right of creditors, prescribed in the Civil Code, in the event of a bank reorganization to demand early fulfillment of all monetary obligations. It is clear that if direct creditors, bondholders or investors want to demand their money in a lump sum, default cannot be avoided. In addition, the code requires that creditors be notified of the reorganization in writing, which imposes significant costs on large retail banks.
“Market participants are ready to buy and merge banks, but do not understand how to do this legally,” complains a top manager of a large Moscow bank. -- The laws and instructions of the Central Bank do not fully describe the procedure or, on the contrary, complicate it too much. Therefore, everyone is following a simple path: either merging balance sheets or transferring assets to one organization.” In particular, according to this scenario, Eurofinance Bank merged Mosnarbank, and Rosbank is now merging with the banks of the UWC group. Often bankers refuse mergers altogether, preferring to create groups and holdings: for example, Andrei Melnichenko did not merge the banks included in the MDM group in 2002-2003, and last year the shareholders of Impexbank and Rossiysky Kredit refused the merger.
The government has repeatedly promised to facilitate the reorganization, but only yesterday Mr. Lukov announced that the corresponding changes to the law “On Banks and Banking Activities” have been agreed upon with key departments and will soon be submitted to the Ministry of Justice for examination. According to the bill, only private creditors (i.e., depositors) will retain the right to early withdrawal of funds from reorganized banks if obligations to them arose before the date of announcement of the reorganization. Legal entity creditors will have such a right only if it is provided for in the loan agreement with the bank. The bill, Mr. Lukov notes, prevents possible attempts by unscrupulous creditors to bankrupt the bank, and also simplifies the procedure for notifying creditors about the reorganization.
Bankers welcome the regulators' steps, but do not believe in rapid improvements. Chairman of the Board of Impexbank Pavel Lysenko told Vremya Novostey that legislative amendments should be followed by changes in “a whole set of regulatory documents” of the Central Bank. “It is still difficult to judge how sharp the growth in mergers will be, but if the idea of simplifying the process is followed, then an increase in the number of these transactions is not far off,” he believes.
In 2003, the Bank of Russia already made changes to the instructions in order to reduce the administrative burden on banks during reorganization, but market participants, apparently, were not satisfied with such measures. First Vice President of Converse Group Maxim Safonov says that “reorganization within the framework of the current instructions of the Central Bank is too expensive: the market needs instructions that are acceptable not only to regulators, but also to the entire banking community.” However, he expects that the actions of the Ministry of Finance and the Central Bank “should give a fairly strong impetus to those market participants who are interested in increasing the capitalization of both their own credit institutions and the entire banking sector.” Yuri VERETENNIKOV |
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