The chances of the creditors of the bankrupt Russian banks for repayment of a debt are smaller, analysts say the international rating Agency Standard & poor’s Global Ratings. According to their estimates, the level of reimbursement of debt after the liquidation will be reduced in the coming years.
From 2009 to 2015, average recovery such banks senior unsecured debt (also referred to as “senior” debt — debt that shows the Issuer’s credit standing), adjusted for individual cases, was about 10%. For comparison: at the same time, the average rate of reimbursement of debt on retail deposits, which are insured by the government and had preferred the prospect from the point of view of priority of payment, the average was 70%.
According to the Agency for Deposit insurance (DIA), last year was returned 16.3 per cent, compared to 7.7% in 2014. The growth was due to the creditors whose claims against the Bank have been fully satisfied. As explained by S&P, the situation where the shareholder is compensated for all the losses were unprecedented for the market. In this regard, it is believed that about 80% of the growth of debt repayment during this period compared to the 2014 year applies to this one-off payment.
As explained by S&P analysts, the level of reimbursement of debt “burst” of banks will be reduced due to the following factors. In 2015-2016, the amount of negative equity increased compared to the previous period, indicating that asset quality deterioration at the time of revocation of the license. In particular, the ratio of total assets to total liabilities at the date of revocation of the license was reduced from approximately 50% in 2015 to 28% in the first half of 2016.
According to the Agency, statistics provided by ACB and the Central Bank covers a relatively small banks, the bankruptcy procedure which ended. S&P believes that once completed the procedure of bankruptcy of the larger banks and this will be reflected in the statistics, the percentage of recovery of debt is likely to be reduced. This is due to the rather poor condition of the banks, which are still in the healing process, and increasing administrative and litigation costs because of a longer period of recovery of larger banks.
Given the policy of inflation targeting, the Central Bank and less political willingness to use public funding to support private investors involved in the restructuring of the banks, S&P expects greater use of the regulator of the process of rehabilitation of banks through the mechanism of bail-in (allows for rehabilitation to use the funds of creditors whose claims are turned into stock, or placed on irrevocable deposits at low interest rates), which usually leads to cancellation or conversion of certain obligations to the capital of the second or even the first level and further reducing the level of reimbursement of debt.