Life after death: what do you think the bankers of salvation at the expense of depositors

Life after death: what do you think the bankers of salvation at the expense of depositors


If the mechanism of bail-in was introduced three years ago, the cost of Bank rehabilitation would be reduced by 20-25%, said Wednesday the Chairman of the Bank of Russia Mikhail Sukhov. He cited some figures: total hole in the balance sheets of the rehabilitated banks now amounts to 500 billion rubles, the funds of major creditors in these, 130 billion rubles In its opinion, the distribution of the mechanism of bail-in for private investors with a Deposit of 100 million rubles. would not give substantial savings. “215 banks with revoked license, the amount of funds creditors with deposits of over 100 million rubles to 180 billion rubles, with a hole of 1.2 trillion rubles”, — said Sukhov.

The day before, on Tuesday, the spread of the mechanism of bail-in on depositors was supported by another Chairman of the Central Bank Alexey Simanovsky, told journalists that “in principle, individuals could be members, but only in those cases when it is in their interests”.

The initiator of this idea is the Ministry of Finance last week was addressed by Deputy Finance Minister Alexey Moiseev, saying that forced conversion of deposits into banks is discussed in the framework of the “internal discussion” in the Ministry.

asked the bankers and financiers, what do they think about this method of bailing out the banks.

Chairman of the Board of Directors of MDM Bank Oleg Vyugin

“Forcing depositors to save the banks will lead to further transfer of deposits from small banks to large, primarily state, and will accelerate the process of reducing the number of private banks. Bail-in is an economically risky mechanism, which is used elsewhere in the world only once, in Cyprus, and then for political reasons.

It is possible to talk about the procedure, when investors voluntarily and not mandatory, as suggested bail-in, ready to participate in the Bank’s equity, which proved to be problematic. This may make sense if you have a small chance to rehabilitate the Bank, because large depositors as a result of Bank bankruptcy procedure rarely return more than 20% of their contribution, and often nothing at all get. Although in this case, depositors will not be able to manage your money, and “to cash out” from the Bank’s capital, they can only hypothetically, for example if the controlling shareholders will wish to redeem their shares”.

Chairman of the Board of Directors of National reserve Corporation Alexander Lebedev

“Bail-in may not be effect. The effect can only be the case if the Central Bank will begin to prevent the embezzlement of the banks funds. Depositors ‘ funds most of the banks, deprived of licenses, were stolen. What will be the effect if the next or Vneshprombank “Pushkino” will go bankrupt and their investors instead of zero “draw” some shares — this is the same scratch paper “corpse”. I don’t understand what prompts people to keep in questionable banks large sums of money. The same way do not believe that the regulator and law enforcement agencies is unknown where the money was stolen and who stole them. We must return the funds to bring the perpetrators to justice, making this work one of the important directions of the state policy, it is necessary to improve banking supervision — that it would have worked. And in Cyprus generally outrageous: there investors too while anything I can not return”.

Chairman of the management Board of Nordea Bank Igor Bulantsev

“The introduction of bail-in may contribute to raising the financial literacy of investors, a more reasonable relation to the Bank of their choice, for its reliability, transparency, and financial condition. I wonder why it is still looking at what is happening in the banking system, people keep large sums in the banks, about which little is known. To rescue the banks bail-in could in theory help if the threshold amount is convertible into equity Deposit will be small. For example, from 1.4 million rubles, that is, starting from the upper bound of the sums insured by the state”.

Chairman of the Board of ROSBANK Dmitry Olyunin

“In major Russian banks, a fairly large share of deposits — over 100 million rubles, it is only a little more than $1 million of Someone might have received dividends or sold the apartment in the center of Moscow, and money for some time has placed on Deposit. Moreover, banks have deposits and much more — billions of rubles.

From the point of view of the major contributor, the use of the mechanism of bail-in may be a good alternative to the existing bankruptcy proceedings. If the Bank started having problems, it is likely that remaining at the end of the list of creditors, the investor simply never make their money back. If the contribution to be converted into shares of the Bank, in the case of restoration of its solvency, perhaps in a few years he will be able to save savings. I don’t think if such a practice will appear in Russia, there will be an outflow of deposits or a large concentration of them in the top 20 largest market players. Often the decision to put a major contribution in one or another Bank not related to the value of its assets.”

The President of the Association of Russian banks (ARB) Garegin Tosunyan

“Bail-in is an additional possibility for readjustment of the Bank. When the Bank loses license, all that more than 1.4 million rubles, rarely gets returned as a result of bankruptcy procedures, especially in full. The investors will have the understanding that in case of problems with the Bank, trust their money, they become its shareholders. This will put them at ease, increase their confidence in the system overall, including small banks”.

Co-Owner Of Sovcombank Sergey Khotimsk

“I don’t think due to the introduction of bail-in will flow to deposits. Large depositors, as a rule, know where and why they have their millions. They were aware that this money is not insured in the Deposit insurance Agency, so do not count on guarantees from the state in case of bankruptcy of the Bank. But even if the flow to the big players, and because of this affected individual credit institutions, it is still the best option. Because otherwise the problems of these banks still would have been, but maybe the business would collapse a month or two or three later. And so the banking system is quickly cleared from unstable banks. The market will become more public due to the appearance of new minority shareholders.

In addition, if judged on our practice of bankruptcy, when converting the deposits to their owners will become the owners of the banks. What does this mean? First, they receive shares in the Bank, it can be seen as investments in the financial business, the asset will still be some cost, it can be sold. Second, banks with revoked license in effect, ownerless, their assets disappear, and creditors often receive nothing. The interim Manager from the Central Bank would never be so interested in the refund, as those who held funds in a bad Bank and then became its shareholder. Finally, often the banks, which the Central Bank revokes the license of remain enough high-quality assets that can still work. For example, perhaps if for the salvation of Probusinessbank would use the mechanism of bail-in, now the Bank might still would have worked, because he, despite all the problems, remained the portfolio of credits to small and medium businesses and advanced enough technology”.

The General Director of the Analytical credit rating Agency (ACRA) Ekaterina Trofimova

“The purpose of the mechanism is, primarily, to increase the stability of the banking system. Emphasize that this is only on banks that found themselves in near-critical situation, therefore, according to the ACRE, the mode of bail-in should not have a material adverse effect on the dynamics of attracted funds in the banking system as a whole. It may be some migration of funds in larger financial institutions, but this process we observed in the last two years.

However, the conversion of Bank liabilities into equity will increase its sufficiency to absorb received (expected) losses. This may solve the problem of maintaining operations and implementing regulatory requirements. Long-term strategic plan, where new management is intended to adjust the Bank’s strategy (to adjust the business model) to avoid repeating problems in the future.

Repayment of funds uninsured creditors of banks on unsecured claims is extremely low in Russia (by estimations of an ACRE, on average below 5%). Therefore, a new mechanism (although, depending on implementation details) may be more profitable for large lenders and is able to increase the rate of return for their investments.”

Former Vice-President of the Board of Directors of Bank of Cyprus Vladimir Strzhalkovsky

“The very public discussion of this problem suggests that most of the large private banks are in poor or very poor condition. For a long period of time, such banks worked almost uncontrollably, only in the interests of its owners and related persons. Now the problem is, due to the criminally irresponsible activities of these bankers and are in the process of state bodies, can be passed on to bona fide investors — individuals and legal entities. I am convinced that with the beginning of this discussion, will start the flight of deposits from banks, further worsening the difficult situation in the banking sector. The example of Bank of Cyprus shows that such measures do not address, and transfer the problem to future periods”.

Vladimir Strzhalkovsky has become a shareholder of Bank of Cyprus to the bail-in conducted in 2012. Then in the midst of the financial crisis in Cyprus as part of measures to rescue the financial system of the country, the Bank absorbed its nearest rival, Cyprus Popular Bank, has been recapitalised by conversion of deposits into shares.