Translated material
DIA presses on speed
The agency is ready to trade with banks
The Deposit Insurance Agency, it seems, does not have enough powers as a liquidator of banks and an organizer of insurance compensation payments. The other day, the head of the DIA, Alexander Turbanov, announced his readiness to participate in the Banking Supervision Committee of the Central Bank, and yesterday the agency proposed revolutionary changes to the procedure for selling the property of bankrupt banks. In order not to waste time and money on selling the assets of a problematic financial institution, the DIA proposes to provide in legislation for the possibility of selling such a bank at auction in its entirety - with its branch network, real estate, equipment, as well as employees and clients. According to the Central Bank, this system will work subject to the expansion of the powers of the DIA. It is expected that the DIA's proposals will be formalized in the form of amendments to the Civil Code, laws on bank bankruptcy and deposit insurance. It is still unknown when these bills will arrive in the State Duma, but bankers are already very pessimistic about the possibility of buying “something decent” at such auctions.“Today, the bankruptcy procedure and satisfaction of obligations takes at least a year, and if the bank is large, then even more,” said DIA Deputy General Director Valery Miroshnikov yesterday, speaking at the agency’s expert council. The lengthy procedure involves large expenditures of funds from the bankruptcy estate of the bank on the archive, the salary of the bankruptcy manager, the organization of auctions and meetings of creditors. And most importantly, all this time the money of creditors, especially the last priority, remains frozen in the bank and depreciates over time. However, in foreign practice, it is possible to liquidate a bankrupt in such a way that allows, to one degree or another, to preserve his business. “In the USA, this is how the deposit insurance commission works: they come to a bankrupt bank, and after a short time, a few weeks at most, clients can come to the premises of their bank, but now operating under a different sign. The business is simply sold with all obligations, branches and equipment,” Mr. Miroshnikov gave an example.
This is exactly what the DIA proposes to do, recommending the introduction into bankruptcy legislation of a procedure for “transferring the debtor’s property complex along with its obligations to an existing entity.” Simply put, a bankrupt bank is sold at auction to any existing bank that wins the competition. The main condition is that the obligations of a bankrupt bank should not greatly exceed the amount of funds and property available to it. That is, funds should not be withdrawn from the bank. Such precedents, according to the deputy general director of the DIA, are becoming more and more numerous: “If at the beginning of the DIA’s activities the ratio of assets and liabilities of liquidated banks was catastrophic, now there are more and more banks where assets are comparable to liabilities to creditors. During the entire period that the DIA has acted as a bankruptcy trustee, this procedure has been completed for 26 banks. There are currently 94 cans in production.” As is known, the main reason for license revocations is failure to comply with anti-legalization legislation. And the Chairman of the Central Bank, Sergei Ignatiev, noted that such banks, as a rule, “meet all the standards with a huge margin, they have large assets (although a significant part of them is in cash and in correspondent accounts with the Central Bank).”
The main advantage of the idea proposed by DIA is the pace of sales, which will allow not to lose the bank's business, customer trust and branch network. By purchasing a property complex, the new owner receives an appropriate market share, customer base, network, and assets. Thus, during bankruptcy, the procedures for selling property, collecting receivables, and settlements with creditors are excluded, which significantly simplifies and shortens the process. Another significant advantage will be that all agreements of the bankrupt bank with clients after its sale continue to be valid on the same terms, transferring to another bank - deposit rates remain unchanged, loans will not have to be repaid ahead of schedule. According to the DIA, a couple of months will be enough to expedite the procedure for selling a bankrupt bank, provided that the assessment and inventory of property begins at the stage of work of the temporary administration.
The idea will require significant amendments to the legislation, since the complete sale of the bankrupt at auction is assumed without special consent from the creditors. Today, with any reform (merger, resale), all creditors (and this includes all bank depositors) must be personally notified of the change in structure. Since it is impossible to quickly notify everyone, the DIA, as an option, suggests publishing a general notice in the media, and if creditors have not come to terminate the agreement with the bank, consider them to agree to the procedure for its sale. “The Civil Code obliges to notify all creditors, and each of them is free to terminate the agreement with the bank. We propose not to do this, because with the sale they remain with all the rights that they had,” argues DIA General Director Alexander Turbanov.
“We understand that this is a risk for creditors, so in case the acquiring bank fails to meet its obligations by purchasing a bankrupt bank, the DIA will bear monetary responsibility for all obligations of the bankrupt bank, and also have the right to weed out unreliable buyers. And of course, a prerequisite will be that the bank is sold with all equipment and property,” said the head of the DIA.
The DIA's proposals seemed very interesting to Ruben Amiryants, Deputy Director of the Department for Licensing Activities and Financial Recovery of Credit Institutions of the Central Bank of the Russian Federation. And the forced restrictions for creditors did not bother him: “The law will work only if the right of creditors to notification is limited. But this is a beneficial infringement of rights; in the end they will be better off,” he says. “And for the proposed procedure to work, more serious powers of the regulatory authorities are needed (in this case, the DIA - Ed. ), otherwise not only creditors, but also some owners will hinder the implementation of the procedure.” The representative of the Central Bank recommended working further on the project, in particular, determining from what funds the DIA will be liable to the creditors of the banks being sold.
Bankers are still pessimistic about the possibility of acquiring problem banks. “A bankrupt bank may only be interested in its network or the buildings it owns,” says the chairman of the board of one of the banks. - Due to the bankruptcy of the bank, its customer base is collapsing, there is nothing for the buyer to hope for. As for real estate, in particular bank buildings, they are often outside the balance sheet of a credit institution. In addition, I don’t know the bidding mechanism in Russia, thanks to which it would be possible to sell all this competently and comprehensively.”
In addition, the DIA also proposes to legislate the possibility of creditors receiving part of the bank’s property in compensation for its obligations. Amendments will only be required to the law on bankruptcy of credit institutions - the ban on the sale of a bankrupt bank and the impossibility of replacing assets must be removed from it (clause 5 of Article 50.33). In this case, such a mechanism as compensation will be possible - the transfer of part or all of the bank’s property to its creditors, provided that they themselves agree on how to dispose of it. For example, property that is of interest to a creditor may be given to him on the condition that he will satisfy part of the demands of the others - based on the value of the property. To resolve these issues, the DIA proposes to organize an “association of creditors.”