In the era of financial crisis, the word "reorganization" can scare even an experienced investor. Banks are closed, or they are absorbed by other financial institutions. What should investors do?
Essence
Remediation is a recovery procedure of a financial institution. It is considered successful if bank bankruptcy prevented. According to the Law of the Russian Federation “On the insolvency of a credit institution”, reorganization, appointment of an interim manager and reorganization are equal measures aimed at preventing bankruptcy.
Background
In Art. 4 of the Law, the grounds for the recovery procedure are described:
- dissatisfaction of claims of creditors over the past six months monetary obligations non-payment of payments within 3 days due to lack of funds in correspondent accounts;
- violation of capital adequacy standards;
- a decrease in capital by 20% or more in comparison with its maximum value for the previous year;
- violation of current liquidity standards for the month by more than 10%;
- decrease in capital below the authorized level.
The last paragraph applies only to institutions that operate on the market for more than 3 years.
Actions
If one of the above conditions occurs, the head of the bank within 10 days applies to the board of directors with a request for reorganization, notifies the territorial institution of the Bank of Russia about it. The Supervisory Board must make a decision within 10 days and report it to the Central Bank. In case of violation of the deadlines, the Bank of Russia will deal with the issue of improving the financial institution.
If the Central Bank itself detects a fact of a decrease in standards, it sends a request to the bank to bring the amount of capital in line. He may also involve the Deposit Insurance Agency (DIA) in the recovery process. Next, the feasibility of restructuring the bank is assessed. If the DIA refuses to participate in rehabilitation, then the license will be taken from the financial institution. If the Agency agrees to participate in the process of improving solvency, then reorganization of the bank will begin. What does it mean?
The agency draws up a rehabilitation plan, looking for investors. Fully finance bank by state means not. Remediation in the banking system is carried out by the DIA, the Central Bank and the investor. Founders may also provide financial assistance. The reorganization procedure provides that the institution will be led by a temporary administration appointed by the Bank of Russia. DIA conducts a detailed check of the register of investors. Persons whose deposit amount, including interest, does not exceed 1.4 million rubles, can expect a 100% return on investment.
What is insured?
Protected are all funds of individuals and individuals located on deposits and current accounts. They are automatically recognized as insured after opening a deposit. But there are exceptions to this rule. Not subject to insurance:
- deposits certified by a bearer savings certificate;
- funds in the accounts of lawyers intended for professional activities;
- assets transferred to trust;
- deposits in branches of a credit institution abroad;
- electronic cash;
- depersonalized metal bills.
Revocation VS license revocation
Do not confuse the terms “liquidation” and “bank reorganization”. What does it mean? In case of revocation of a license, a credit institution is prohibited from engaging in banking activities. After the completion of legal proceedings, it becomes bankrupt. A bankruptcy trustee is appointed, all property is sold.And at the expense of the proceeds and popular loans all obligations are repaid.
Remediation is a recovery of the bank. The Central Bank does not take the license. The institution continues to work. A temporary administration is introduced in the bank, the owner changes. The Central Bank gives a new investor a loan to support instant liquidity. The bank continues to work.
In theory, all is well. But in practice, the new owner may introduce a ban on early termination of deposits as a measure aimed at restoring the financial condition. From the point of view of the financial institution, this is a logical move. The Central Bank loan may not be enough to restore liquidity. But the panic-stricken investors will begin to act unreasonably. In particular, they may apply to the Central Bank with a request to revoke the license from the rehabilitated bank. It is important to understand that DIA may simply not have enough funds to pay all insurance in case of bankruptcy of a large institution. Such cases already exist. For example, the reorganization at the Bank of Moscow has been extended until 2018. In the process of recovery, the list of distressed assets increased by another 12.7 billion rubles. As a result, the accession of a credit institution to VTB is postponed indefinitely.
What to do?
First off, do not panic. If the Central Bank has not introduced a moratorium on early withdrawal of deposits, the safety of funds in the sanitized bank is worrisome, you are ready to lose some of the accumulated interest - contact the bank office with a request to return the deposit ahead of schedule. If the conditions of the loan are attractive, let the money remain in the credit institution. After lifting the moratorium, you can safely return the contribution. Remediation is a recovery of the bank. But if it does not work, then the worst thing that can happen is the revocation of the license. What should investors do in this case?
- Check on the DIA website whether reorganization is carried out in a particular bank.
- Find out from what date applications from investors are accepted.
- To appear with a passport within the indicated period and write a request for a refund.
- If the sum of all deposits, including interest, does not exceed 1.4 million rubles, after 3 banking day funds will be transferred to the specified details.
This is the situation in theory. In practice, when analyzing the activities of a rehabilitated bank, it often turns out that most of the documents are fake. A check begins to identify the real bank depositors. This process takes a lot of time. People had to wait for their money for several months.
If the deposit amount, taking into account interest, is more than 1.4 million rubles, you can return everything that is above the insured difference only after competitive production - sale of assets and property. Usually this process takes two years. The requirements of individuals are satisfied in the first place, IP - in the third.
This problem primarily threatens the holders currency deposits. At the beginning of 2015, when the ruble depreciated more than twice, readjustment was actively carried out in the banking sector, holders of dollar deposits were not able to get their savings. The amount of the deposit and interest was recalculated at the exchange rate of the ruble according to the Central Bank on the day the license was revoked. As a result, depositors who had more than 700 thousand rubles in their accounts automatically dropped out of the DIA program.
No offsets allowed
Very often people get a loan and a deposit in one bank. If bankruptcy proceedings are ongoing, then the amount of compensation will be reduced by the amount of the loan. Offsetting is not allowed. That is, if a client has issued a loan of 1 million rubles and a deposit of 2.4 million rubles at the bank, then in order to repay the funds, you must first repay the loan, and then you can get a deposit in the amount of 1.4 million rubles. Up to this point, the bank can only pay: 1.4-1 = 0.4 million rubles.
