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Concept of Activities of State Corporation DIA Aimed at Implementing Federal Law "On Insolvency of Credit Organizations"




I. ASV as Corporate Arbitration Manager. .....................................................................

II. Goals, Objectives and Principles of Activities in Arbitration Manager Capacity ....

III. Organization of Bankruptcy Procedures Management... ..........................................

IV. Credit Organizations' Assets Management in Bankruptcy Process ......................

V. Interaction with Credit Organizations' Creditors in Bankruptcy Process ................

VI. Enforcement of Parties Liable for Credit Organization Bankruptcy .......................

VII. Agency Liability in Arbitration Process......................................................................



State Corporation "Deposit Insurance Agency" (hereinafter - Agency) is authorized to fulfill functions of arbitration manager in accordance with the Federal law dated August 20, 2004 #121-FZ "On Introduction of Amendments in the Federal law "On Insolvency (Bankruptcy) of Credit Organizations".

As of the date of enactment of the above federal law, Agency incorporated by the Russian Federation as non-commercial entity will replace individual arbitration managers acting in bankruptcy process of credit organizations.

Changes taking place within arbitration process framework are of principal character as necessity for state participation in bankruptcy process is officially admitted, and a special corporate body (Agency) has been established through which state involvement is ensured.

Fulfillment by Agency of the authority of arbitration manager is crucial imperative for strengthening confidence in the banking system of the Russian Federation. The system is designed to ensure realization of public functions connected with attracting and depositing monetary resources of legal entities and households, as well as ensuring settlements between households and corporations.

I. Agency Function of Corporate Arbitration Manager

Agency acting in the capacity of corporate arbitration manager in according with the federal law and assuming full responsibility for bankruptcy process, shall be able to fulfill:

  • Consolidate and timely re-distribute available labor and material resources to accomplish arbitration primary goals;

  • Pursue in accordance with all currently operating legislation recovery of illegally owned and/or retained assets of liquidated credit organizations;

  • Timely establish and settle creditors' claims, form bankruptcy estate and preserve property of liquidated credit institutions;

  • Reveal and invalidate suspicious transactions, search for illegally retained property and ensure enforcement of parties liable for credit organization failure;

Agency will be able to control in "real time mode" effecting all kinds of bankruptcy settlements, as bankrupt banks accounts in accordance with the federal law are to be opened with the Agency. Funds movements from such accounts can be slopped or suspended at any time by Agency decision.

Agency will execute its function of a corporate liquidator in combination with its DIS manager authority established by the federal law "On Insurance of Household Deposits in Banks of the Russian Federation". Combining these functions by the Agency does not imply any conflict of interest, as Agency primary goal in all its capacities is aimed at defending rights and legal interests of creditors -legal entities and individuals, as well as strengthening confidence in the banking system of the Russian Federation. Moreover, above conflict of interest becomes impossible due to

specific provision in the deposit insurance law stipulating that subrogated by Agency claims against credit organizations after deposit payouts are to be presented by Federal Body authorized by the Russian Federation Government. In accordance with Government decree #548 dated October 14, 2004 - this federal body will be Federal Tax Service under Finance Ministry of the Russian Federation.

Combining the authority of deposit insurer with the function of corporate liquidator will facilitate settlements with depositors of failed banks. With depositors' permission settlements can be effected through agent banks selected by Agency to effect payouts in triggering event. Implementing the principle of "one settlements counter" will expedite and simplify settlements with depositors. Further by combining two functions Agency will be able to obtain full and reliable information regarding assets status of liquidated banks, the value and timing of their disposition, which enables Agency project timely and full recovery of funds from receiverships of failed banks.


II. Goals, Objectives and Principles of Activities of Agency as Corporate Liquidator

Alongside with arbitration goals related to liquidation of a specific credit organization and settlements with its creditors, Agency will resolve general issues aimed at divulging causes that gave rise to bank's failure and developing proposals to prevent bankruptcy in the banking system. In its activities Agency is governed by the following principles:

1) conducting bankruptcy procedures in full compliance with federal laws and Agency internal regulation;

2) strengthening state predominance when conducting bankruptcy process;

3) ensuring corporate decisions on issues related to property management;

4) accountability of Agency representative to Agency corporate board;

5) liability of Agency for damage caused to creditors and other bankruptcy process parties;

6) transparency of bankruptcy procedure, disclosure of information on arbitration process;

7) funding expenses incurred in connection with bankruptcy from receivership. If property is insufficient to establish receivership, Agency will fund arbitration process from its resources;

8) Agency shall be accountable to creditors represented by creditors' meeting,

committee, etc, arbitration court reviewing specific bankruptcy case and the Bank of Russia.


III. Organization of Bankruptcy Procedure Management

Bankruptcy management is carried out on the basis of internal rules that govern Agency operations at each stage of arbitration process. The rules are aimed to ensure uniform technological and legal discipline and establish forms and methods for repeated operations needed in the course of arbitration process. Authority of arbitration manager is executed by Agency representative nominated out of the list of its full-time personnel, or contracted for the period until all authorized responsibilities are completed. Agency representative acts on the basis of issued power of attorney. /she can execute authorized duties simultaneously at several liquidated banks located in one region.

To execute homogeneous and periodically repeated operations specialized teams can be established consisting of Agency personnel and (if needed) staff of liquidated credit organization. Such teams can effectively operate to identify creditors' claims, maintain claims' register, etc. For appraisal of liquidated banks' property, independent experts can be contracted on competition basis. Contracted parties conduct independent appraisals, organize tenders, provide legal services, participate in establishing claims and maintaining registers.

Agency established unified complex monitoring/control system over efficient bankruptcy management. Agency submits needed bankruptcy information to the Bank of Russia and agrees intermediate and final liquidation balances of liquidated credit organizations with it.


IV. Asset Management in Arbitration Process

When establishing bankruptcy estate, Agency should manage its assets. In this regard detailed analysis of property is conducted, its market value determined, foreclosure of assets ensured and open auctions organized to dispose of liquidated organization's property.

Funds available at accounts of liquidated credit organizations opened with the Agency can be temporary invested on financial markets. Agency is authorized to accrue interest on deposited funds with the purpose to further increase receivership's value. Agency can organize auctions to sell liquidated banks' assets or contract specialized companies to conduct such auctions. Asset management system is open for creditors. Agency proposals on auction conditions are agreed with creditors' meetings or committees. Property of liquidated organization that was not sold at repeated auction is purchased by Agency to defend creditors' interests and avoid writing off such assets.


V. Interaction with Creditors of Liquidated Organization in Bankruptcy Process

Interaction with creditors of liquidated credit organization is aimed at meeting maximum claims in accordance with established priorities. Agency ensures transparency of operations and seeks to resolve disputes and differences by negotiating. Settlements with creditors start no later than 6 months after bankruptcy decision is awarded by arbitration court. Creditors have 60 days to file claims from the date of bankruptcy publication.


VI. Answerability of Parties Liable for Credit Organization Bankruptcy

Agency organizes activities aimed at identifying and enforcement of parties responsible for credit organization bankruptcy. To trace the above Agency uses materials of conducted examinations and financial statements of liquidated organizations. If receivership funds insufficient to meet creditors' claims, Agency files lawsuits against persons liable for credit organization bankruptcy. If intentional bankruptcy is established, Agency is authorized to enforce vicarious liability or refer matters to criminal courts.


VII. Agency Liability in Arbitration Process

If provisions of federal laws are violated by Agency, it shall be liable in accordance with the Russian Federation legislation. In case of damage to liquidated credit organization due to non-fulfillment or improper fulfillment by Agency of its respective responsibilities, Agency shall compensate the loss at the expense of its property.

Agency can have its liability insured against the above. Agency shall not be answerable for obligations of liquidated credit organizations, and vice versa. Obligations arising in connection with executing by Agency its corporate liquidator authority cannot be enforced against deposit insurance Fund, as this fund in connection with the federal law has designated purpose - to compensate depositors in triggering events.