Temporary administration: concept and features of the introduction

There are two stages to declaring banks insolvent: interim administration and liquidation. But before this, some distinguish one more: establishing the status of a problem financial and credit institution. What does this mean for depositors as well as bank lenders? What measures can be taken if information about the sad situation has arrived?

general information

The interim administration is the first step towards declaring a financial institution bankrupt. It begins with the fact that a certain institution is declared insolvent by the decision of the Central Bank. To do this, there are a number of conditions and clearly written provisions that are framed in a separate law. The decision of the Central Bank is transmitted to the Deposit Guarantee Agency and published on the official website. Then, a special officer is appointed to whom the bank management delegates its authority. This is what the introduction of interim administration looks like.

At the same time, all imposed arrests are removed from the property of the financial and credit institution, penalties for late arrears are not charged, and the requirements of creditors and depositors are not satisfied. If someone is suing the bank, then the claim is denied, and the process is terminated. If you managed to get a court decision in your favor, it was transferred to the executive service, and the provisional administration was introduced here, then you can forget about it. In this case, the production is suspended, and if the liquidation of the bank begins, it closes. That is, from the moment the bankruptcy bodies begin to work, it will not be possible to recover something by force. You must try to manage to withdraw your money before this point.

How it works?

The interim administration of the Central Bank in Promsvyazbank is a fairly fresh and ambitious solution, on the example of which it will be convenient to consider how it all works. The selected object is systemically significant. At the time of the introduction of a special position, he was in tenth place with assets of 1.23 trillion rubles! It was decided to reorganize and provide liquidity to increase financial stability. At Promsvyazbank, the interim administration of the Central Bank was not a surprise. She was expected, and rumors about the introduction began to circulate shortly before the decision. In general, this is not the worst option for a financial institution.

It was decided that the interim administration of Promsvyazbank would work to get it on its feet. So it can be expected that he will continue his activities in the future. Although there is no absolute certainty in this. So, for example, it was said earlier that the procedures aimed at healing were started much earlier, even if they acted in a soft and implicit form. Formalization, alas, suggests that it was not possible to achieve the goal. In addition, the introduction of the provisional administration in Promsvyazbank and reorganization indicate that they are going to save it through the budget, that is, taxpayer money. It should be noted that it was processed using a new mechanism. In addition to him, the provisional administration was introduced in the same way at Binbank, as well as Rost Bank, Rossgosstrakh, Trust and Otkrytie FC.

What is the position of the structures that have come under external control?

The situation is different. If we talk about Promsvyazbank, then a demand was put forward for him to increase the amount of reserves by 100 billion rubles, although analysts and the old leadership claimed that this was too much for him.There was some recognition in the financial markets, but relatively little. So, for example, the temporary administration of Promsvyazbank recorded the existence of an eternal bond worth half a billion dollars, as well as three issues of subordinated Eurobonds totaling $ 1.033 billion.

Due to the restrictions introduced, structures under the control of external management are not popular, and many are trying to try their luck and withdraw their funds in an emergency. But to do this is very problematic: the legislation establishes that only those persons who have ended the term for transferring the deposit have the right to do so. In addition, a restriction has been introduced on withdrawals - now you can get no more than 1.4 million rubles in one hand.

But what happens in the financial institution itself? Initially, all documentation is put in order and an audit of the current situation is carried out. That is, how many loans were granted, to whom, at what interest, what is the share of repayments, and the like. Also, in order to prepare a payment to deposit holders, it is estimated how much money will be needed. In practice, not everyone applies, so the amount will be a little less.

What should investors and lenders do?

What is the behavior algorithm here? So the interim administration was introduced at Promsvyazbank. A depositor (private person) who had an open account, has a registered certificate of deposit or a concluded agreement on the transfer of money, wants to receive his own money. In this case, his right is guaranteed by the state. If we talk about enterprises, as well as those people whose claims amount to more than 1.4 million rubles, then their claims will be repaid exclusively at the expense of the bank’s property. They have creditor status.

What must be done to get their money to investors? Ideally, nothing. It is necessary to wait for a written notice about which bank you can contact to receive the amount due. A specific deadline has been set for this, but in practice it is not respected. If the notification did not come, then this does not mean that the money will not be received. Just in this case, you will have to send a guaranteed registered letter to the deposit insurance agency. It must include the following information:

1. Information that the contract has expired.
2. There is money in the account and there is a desire to receive a guaranteed amount.
3. Indicate the identification code, passport data, details of the contract and the date of its expiration.

At the same time, if any of these data has changed, then a letter must be sent necessarily. Also, you can not do without it in cases where there was a lawsuit and the bank counted penalties. In this case, a copy of the decision must be attached to the letter. When working with financial institutions, it is very important to document everything that is possible. And also to ensure the preservation and subsequent use of the collected information. After all, we are all people, and the interim administration at Promsvyazbank or another similar structure is no exception. Documents may be lost, or something else will happen to them, which will lead to difficulties in using them.

When and how does it end?

More often than not, if an interim administration has been introduced, this indicates that the institution will be liquidated. But such a development of events is not always found. There are tight deadlines. If for a certain legislative period of time it was not possible to normalize the situation and the restoration of activity did not occur, then the institution will be liquidated.

You should not start the situation and pull too much to get your own funds. After all, the ability to get your own money is limited in time. And if you can’t cope for the allotted period, then they will simply be canceled. And here, alas, no one else can help.In fairness, it should be noted that the period takes quite considerable time periods, therefore, if at least once a month to devote several hours to settling all the cases, then getting your own money will not be difficult.

Legislative basis

For example, a provisional administration was introduced in the bank "Ugra". What served as the legal basis for such action? First of all, it is necessary to mention the federal law “On the insolvency (bankruptcy) of credit organizations”, as well as regulatory acts of the Central Bank. It is here that it is indicated that the powers of the executive bodies are limited or suspended in the prescribed manner. Article 17 deals with situations where the Central Bank has the right to introduce an interim administration:

1. A financial institution cannot meet the requirements of individual creditors for monetary obligations assumed or does not fulfill payment of obligatory payments within a time period that exceeds seven days from the date of their satisfaction according to previously concluded agreements due to the fact that there are no or insufficient funds in correspondent accounts .
2. Banks allowed a decrease in equity compared to a maximum of thirty percent over the past twelve months while violating the standards established by the Central Bank.
3. The financial institution violated the current liquidity ratio established by the Central Bank by more than 20%.
4. The requirements of the Central Bank on the replacement of the head or the implementation of the necessary measures for the reorganization or financial recovery of the organization are not fulfilled.

Legislatively established that the interim administration cannot be longer than six months. The Central Bank may extend its term of operation, but only until the formation of structures that are engaged in the reorganization or liquidation of a commercial structure. Moreover, if the Central Bank introduced a provisional administration, then it cannot operate for more than eighteen months.

How does legislation regulate work?

In order to head the administration and become its leader, you must have the appropriate certificate. After this, the composition is formed. The head is responsible for the activities of the administration. If the powers of the executive bodies of a financial institution were suspended, then it acts without a power of attorney. According to article 21 of the previously mentioned federal law, the interim administration performs the following functions:

1. Participates in the development of measures aimed at financial recovery of a financial institution. In addition, she oversees their implementation.
2. Manages the property of a financial institution within the powers granted.
3. Other functions in full compliance with federal laws.

In carrying out activities, the interim financial administration may receive all the necessary information and documents. Transactions are possible only with her consent. This primarily relates to:

1. The conclusion of transactions related to the transfer of real estate of a financial institution as a pledge, lease, charter capital of third parties, as well as its disposal in any other way.
2. Actions with assets whose book value exceeds 1% of the bank’s property value.
3. Stakeholder engagement.

What functions are assigned to the administration?

So the provisional administration came to Binbank. What is expected of her? According to the established requirements from the administration, it is:

1. The implementation of the powers of executive bodies.
2. Development of measures for financial recovery of the bank, organization and control over execution.
3. Taking measures to ensure the safety of property and documentation of the organization.
4. Establishment of creditors, as well as the size of their claims.
5. Taking measures to collect existing debt.
6. Appeal to the Bank of Russia with a request to introduce a moratorium on satisfying creditors' claims.
7. Other functions, but only within the framework of the legal framework.

During the introduction of the interim administration, she receives:

1. All necessary information and documentation from governing bodies.
2. Acts on behalf of a credit institution in courts of general jurisdiction, arbitration and arbitration.
3. The right to appoint representatives of the provisional administration to the branches of the financial and credit organization, as well as to subsidiaries.
4. There is no need to coordinate decisions with the board of directors or the general meeting of its founders.
5. May remove executive representatives from the bank and suspend their payment of earnings.

You can verify this by looking at the bank "Ugra", in which the provisional administration was introduced in 2017.

Is there any way for organizations to protect themselves from the introduction of external management?

Yes, it is quite possible. The twenty-fifth article of the federal law “On the insolvency (bankruptcy) of credit organizations” provides that it is possible to appeal the decision to use this mechanism. To do this, you must contact the arbitration court, adhering to the procedure established by federal law. But it should be borne in mind that the appeal process itself does not suspend the activities of a temporary organization. Although to achieve its abolition is not an easy thing. After all, the Central Bank makes a decision on the basis of significant evidence of a crisis in a financial institution. Although, if the reasons that led to the introduction of the interim administration were eliminated, then this changes the matter.

Conclusion

So the management procedures by which troubled banks work were considered. The interim administration, although it is a pretty good solution to minimize the harm of crisis phenomena, nevertheless, it does not allow to completely secure the situation. In general, these are measures of the last frontier, after which only liquidation of a financial-credit institution is next. The best option is to prevent the situation from developing in such a way as to have to introduce external control. To do this, it is necessary to optimally build the credit policy of the bank and not to chase the maximum profit. If we talk about ordinary citizens, we can advise several things:

1. It is always necessary to be interested in how much credit funds in percentage terms are issued to related (affiliated) persons, and also there are no returns or delays are observed.
2. You need to know if the Central Bank does not consider the bank of interest to be problematic.
3. It is necessary to track changes in the structure of assets and liabilities.

For example: if the number of problem loans exceeds 5% of the total number of loans issued, then this is a good reason to think about looking for another bank. You can, of course, take a chance, because financial institutions, which have a deplorable situation, often offer higher interest rates on deposits, but here, as never before, the proverb “Slower you go - you will continue” is relevant, therefore you should not risk all the money for the sake of a few percent arrived.