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Tuesday, March 20, 2018

The Central Bank will continue the improvement of the banks at your own risk

The Ministry of Finance got tired of looking like Central Bank spending billions of rubles on rehabilitation of problem banks. The Agency intends to reduce the costs of the regulator. To this is a bill that needs to change the current Bank resolution mechanism. If you now “fix” a credit institution is taken by the Agency on insurance of contributions, it is now proposed to give these powers directly in the hands of the Central Bank. Thus, it is intended to break the circuit when weak banks don’t wait for your “lifeline” in the form of public money. And with them and their clients.

photo: Gennady Cherkasov

Recovery — a good thing. It is always better to treat the patient than to let the illness take its course – whether it is about person’s physical condition or on the financial position of the Bank.

The Russian Central Bank hard — working healer. Last year, for example, the Central Bank has revoked the licences of 93 credit institutions in 2014 — 94. Was no exception and 2016. He hasn’t come to an end, and the market has left 79 players. Of course, the downside primarily be clients of bankrupt banks. Most of them were lucky enough to get coverage under the Deposit insurance system and to preserve their savings (up to 1.4 million rubles for each contribution). But there are those who have lost their hard earned. Therefore, when possible, the Central Bank tries to keep banks afloat. So, now on improvement are 50 financial institutions. However, as in medicine is not uncommon for “sick” become a means of profit and replenishment of other people’s pockets. Why is this happening?

As explained in Mifune the reason is the current Bank resolution mechanism. Now for the restructuring of banks responding Agency on insurance of contributions (ASV). It receives public funds from the Central Bank in the form of cheap loans which must go to the rescue of the weak players in the market.

However, only one part of ASV’s not limited. Selected Central Bank funds on a competitive basis, are banks-sanatory who take patronage over troubled colleagues and got to his feet.

Moreover, we are talking about trillions. So, the total amount of funding for healthy banks, is 1 of 186 trillion. “In such a chain, there are interests primarily of the Bank’s turnaround, which often uses the money for their needs” — emphasizes the analyst GK TeleTrade mark in real.

Moreover, the Bank-sanator translates a private distressed assets to asset Bank. And this weak player continues to live with the lack of funds many months. This means that without money, and above all its customers.

Therefore, the Finance Ministry proposes to remove unnecessary links in the rescue chain. For this reason it is important to create a “daughter” of the Central Bank, which will be included in the capital of troubled banks and improve their performance. Call it planned by the Fund for the consolidation of the banking sector. And the work it needs without any loans. Money to banks, the Fund will give irrevocable basis. And only after the recovery of the credit institution will be put up for sale. “Thus, the Central Bank will be able to manage the funds directly. That is, the sanitation will be under his control and he will be responsible for it. This will completely, not gradually and partially, to restore the solvency of the Bank. Including the payment of “frozen” contributions to people,” — says the expert.

Moreover, the new scheme will save public funds. And even though ASV provides banks-sanatory loans at low interest rates, but when the money is used for other purposes, grow just debts. The Corporation is already “hanging” duty bound to CB 1.5 trillion rubles. And since the money was needed for recovery of troubled banks, we can say that it is now their “bondage”. According to expert estimates, if the Ministry of Finance and the Central Bank will be able to break through his initiative, the costs will be reduced by 25-30%. And when the Treasury is emptied by the day, and let those small funds will be far not superfluous.


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