When a crisis occurs in countries, many banks face bankruptcy. This phenomenon occurs in cases when the company is unable to pay creditors and ceases to exist. The reason why the bank becomes bankrupt may be the default on the loan, loss of value of assets, losses from operations. Each of the listed reasons leads to the fact that the bank's equity is reduced. If it falls below zero, then the bank is declared insolvent, and this contributes to the fact that liabilities will exceed assets. In such situations, auditors usually decide to terminate the activity of this insolvent financial institution.
Loan repayment delay
If the borrower cannot repay the principal amount of the loan or interest payments, it is considered past due. In such cases, the auditors decide that the bank write off the loan. This means that it should no longer include an overdue loan in the balance sheet. If the bank makes regular profits, writing off several minor loans will not affect its activities and will not affect equity, since this amount will be blocked by the profit received from other loans.
Most often, a bank bankruptcy occurs if for a long time its expenses significantly exceed revenues.
Price drop
The second reason for bankruptcy is the fall in the value of securities in the period from the date of their acquisition to sale. If the bank acquired bonds, which later became much cheaper, this could lead to bankruptcy. In the 1930s, it was precisely because of the falling value of securities that many banks filed for bankruptcy.
Loss
One of the most common causes of bank bankruptcy is the loss from their own activities. This is because the equity of a financial institution is reduced. This situation can lead to the fact that it will be equal to zero, as a result of which the bank will go bankrupt. Most often this happens because he needs to make payments in such amounts that far exceed the profit on assets. Therefore, the value of assets is reduced, and liabilities - is increased, which leads to a decrease in the bank's equity.
Various economic, political factors as the causes of bankruptcy
The reasons why the bank becomes bankrupt may be economic factors:
- Inflation.
- The rate of taxes and bank loans.
- Changes in exchange rates.
- The income level of the population of the country in which the bank operates.
There are also various political reasons:
- Actions and intentions of local and central authorities.
- The attitude of these authorities to different sectors of the economy.
- The presence of influence groups in government and state authorities.
It is worth noting that, as a rule, only one of the above reasons cannot lead to insolvency of a credit institution. Bank bankruptcy occurs due to a lengthy process.
The law on the basis of which the bank declares bankruptcy
Exists Bankruptcy law Bank No. 127 0FZ - this is a regulatory act regulating the grounds on which a financial institution is declared insolvent, the procedure for its liquidation, as well as the sequence of claims of creditors that must be satisfied.
A bank is considered insolvent if its obligations were not fulfilled within 14 days after the expiration of the date on which they were to be performed.
If, at the request of the Bank of Russia, the license of a credit organization is revoked, the arbitration court will be able to initiate bankruptcy proceedings. The applicant may be a creditor, debtor, authorized body, or the Bank of Russia itself.
Persons eligible to be applicants may apply to the Central Bank of the Russian Federation with a request to revoke a banking license from an insolvent financial institution. If the main monetary institution has not responded, then these persons can appeal to the arbitration court in order for a financial institution to be declared bankrupt.
The Bank of Russia must respond within a month. Then, applicants can apply to the arbitration court with a copy of the order to revoke the license, which will be the reason for opening a bankruptcy case.
The Bank of Russia may independently revoke a license from an institution that has signs of bankruptcy. In this case, within 5 days he needs to file a bankruptcy petition with the arbitration court.
Bankruptcy Prevention Measures
It is worth noting that every 5th Russian bank is problematic, so there are certain methods that prevent and prevent the onset of bankruptcy:
- Financial recovery.
- Appointment of an interim administration for bank management.
- Reorganization of the institution.
If the bankruptcy of the bank could not be prevented, then it ceases its activities.
Bankruptcy Features
Both the creditor and the debtor can file for bankruptcy.
The main tasks that must be performed during bank insolvency procedures are: repayment of debt to creditors, as well as restoration of all conditions necessary for the institution's continued functioning.
A bankruptcy petition in an arbitration court is the basis for presenting evidence of payment of a debt. If they are not, then the arbitration court introduces one of the bankruptcy proceedings, which is called observation.
In the event of bankruptcy, the bank can no longer perform any operations.
A bank becomes bankrupt when it is unable to pay all its debts. Another reason for the insolvency of a credit institution is a drop in the value of securities, which can greatly affect its future work. A case that can prevent a bank from bankruptcy involves several procedures. Their implementation can restore the previous work of a credit institution and save it from the status of a debtor.
The bankruptcy procedure itself is quite long and complicated. In order to prevent losses and costs of the debtor, as well as the creditor, it is necessary to contact lawyers who specialize in this field and will be able to provide the necessary assistance.
