To strengthen stability of the banking system, protect the interests of creditors and depositors of banks and ensure its sustainable development, the Agency takes measures to prevent bank failures (resolution).
In the reporting period, the bank resolution mechanism was used much more often than in the previous year.
As of the beginning of 2014, resolution measures were implemented in respect of 6 banks. Within the year, the Agency accepted offers of the Bank of Russia to take part in preventing bankruptcy of 14 banks, resolution measures were completed in respect of 4 credit institutions. Thus, as of December 31, 2014 the Agency took part in resolution of 16 banks (Figure 9).
In the reporting year the Bank Supervision Committee of the Bank of Russia considered and accepted the reports on completion of bankruptcy prevention measures in Bashinvestbank CJSC and KIT Finance Investment Bank (OJSC). In fact, the activity of Bashinvestbank CJSC was terminated in December 2013 as the result of its reorganization through merger with the investor — BINBANK OJSC. The activity of KIT Finance Investment Bank (OJSC) was terminated in April 2014 as the result of its reorganization through merger with JSCB Absolut Bank (OJSC).
The terms of implementation of resolution projects in Bashinvestbank CJSC and KIT Finance Investment Bank (OJSC) were 5 years each during which the objectives of the bank resolution plans were achieved.
Investors of the said banks — BINBANK OJSC and Russian Railways OJSC — performed in full their obligations to the Agency to return the funds provided as financial aid to prevent bankruptcy of Bashinvestbank CJSC and KIT Finance Investment Bank (OJSC).
In addition, in 2014 measures on implementation of one of the new resolution projects commenced in the reporting period — bankruptcy prevention of the Narodny Credit Bank OJSC — were completed.
The only resolution tool applied by the Agency in respect of the said bank was temporary administration of the Agency to manage the bank.
Such decision was caused by the need to take control over operations of the Narodny Credit Bank OJSC and ensure safety of its property to avoid panic among the creditors and depositors of the bank.
However, in the course of work of the temporary administration, the Agency came to the conclusion on the absence of economic expediency to continue measures for recovery of Narodny Credit Bank OJSC as the size of potential financial assistance needed for successful resolution of the bank would exceed the balance sheet total of the bank and would exceed 2.5 times the amount of deposit insurance to be paid to depositors of this bank.
Taking into account these factors, the Bank of Russia made decision on revocation of the banking license from Narodny Credit Bank OJSC as petitioned by the temporary administration of the Agency.
Another bank in respect of which the Agency started bankruptcy prevention measures in 2014 and completed them during the same year was My Bank. Ipoteka (OJSC).
The mechanism of “partial” resolution, i. e. transfer of a part of assets and liabilities of the bank to the purchaser, was fully implemented in respect of this bank. Other measures on prevention of bankruptcy of My Bank. Ipoteka (OJSC) were infeasible due to the significant amount of doubtful transactions and poor quality of the bank’s assets.
The Bank of Russia made decision on revocation of banking license from My Bank. Ipoteka (OJSC) after completion of transfer of its assets and liabilities. Thus, as the result of application of this mechanism, the “healthy” part of business of My Bank. Ipoteka (OJSC) was preserved, the rights and interests of depositors of the bank were protected and saving of the Fund’s resources in the amount of 3.06 billion rubles was achieved.
All other resolution projects commenced in 2014 were implemented by the Agency with attraction of third party investors which is the preferred option of bank bankruptcy prevention measures. On the one hand, it allows to achieve saving of public funds used for bank resolution, on the other hand, to clearly define the model of resolution and further development of credit institutions taking into account the parameters determined by the investors.The bank bankruptcy prevention measures in the reporting year had some peculiar features: resolution of large banks of federal importance, including those making part of banking groups; large-scale falsification of reporting data of the banks in resolution, mainly concerning their liabilities to individuals.
The largest project of the reporting year was resolution of NB TRUST (OJSC) as this bank was in Top 30 credit organizations of the Russian Federation.
To stabilize the situation, the Bank of Russia made decision to appoint the temporary administration into the credit institution to manage the bank, which functions were assigned to the Agency. This measure allowed to restart servicing of the bank’s customers very quickly, thus, to ease social tension.
FC Otkrytie Bank PJSC was selected as the investor in this project. To restore NB TRUST (OJSC) operation the plan of the Agency’s participation in this bank bankruptcy prevention provided for allocation of financing (loans) at the expense of the Bank of Russia in the amount of 129 billion rubles.
Another large project is resolution of MOSOBLBANK Banking Group consisting of JSCB MOSOBLBANK OJSC, INRESBANK LLC and CB Finance Business Bank LLC. SMP Bank JSC acted as the investor in resolution of these banks.
In the course of analysis of financial position of JSCB MOSOBLBANK OJSC conducted by the Agency, considerable amount of hidden liabilities of the bank to its depositors not recorded on the balance sheet of the bank was detected. The total number of such depositors exceeds 300 thousand persons.
Thus, revocation of banking license from this credit institution could cause unprecedented social tension.
To implement resolution measures, the Agency allocated to this group of banks financial assistance at the expense of the Bank of Russia loans in the amount of 117 billion rubles.
Another large resolution project of the reporting year is resolution of the banking group consisting of ROST-BANK OJSC, CB KEDR OJSC, AKKOBANK OJSC, Tveruniversalbank OJSC and SKA-Bank OJSC.
ROST-BANK OJSC faced difficult economic situation caused by poor quality of the bank’s assets. At the same time, CB KEDR OJSC, AKKOBANK OJSC, Tveruniversalbank OJSC and SKA-Bank OJSC has close financial interrelations with ROST-BANK OJSC, thus, there was certain risk of impairment of a considerable volume of assets of these banks purchased from ROST-BANK OJSC and interbank loans placed with ROST-BANK OJSC.
To stabilize the position of ROST-BANK OJSC and prevent deterioration of financial position of CB KEDR OJSC, AKKOBANK OJSC, Tveruniversalbank OJSC and SKA-Bank OJSC, temporary administrations to manage the banks were simultaneously introduced into the said credit institutions as decided by the Bank of Russia. Their functions were assigned to the Agency.
Given close corporate and economic interconnections between ROST-BANK OJSC, CB KEDR OJSC, AKKOBANK OJSC, Tveruniversalbank OJSC and SKA-Bank OJSC, the plans of Agency’s participation on prevention of bankruptcy of these banks were developed with attraction of one third party investor — BINBANK OJSC.
Despite a number of large banks accepted for resolution by the Agency during the reporting period, the largest resolution project is still the Bank of Moscow OJSC. The Agency has been performing measures to prevent its bankruptcy together with the investor — VTB Bank OJSC — since 2011. Within the set of measures to resolve this bank, the Agency provided it with financial assistance at the expense of the Bank of Russia loans in the amount of 294.8 billion rubles.
In compliance with the conditions of the contract, in 2014 the Bank of Moscow OJSC continued partial repayment of the loans as the result of work with problem assets which totaled about 150 billion rubles when the resolution started. As of January 1, 2015 22.03 billion rubles of the loan amount were repaid.
In 2014 five banks in resolution complied with all mandatory regulatory requirements of the Bank of Russia. Possibility not to comply with the requirements as of the date under consideration is envisaged for the other banks by the plans of Agency’s participation in bankruptcy prevention.