"Rehabilitation" and "sanatorium" are words that put fear on the faces of many savers, especially in the era of the global financial crisis. In a literal translation, "sanation" is interpreted as a recovery. If we impose a definition on the banking sector, then it can be interpreted as the recovery of a financial institution. A sanator is a person or enterprise that is responsible for restoring the functionality of a banking institution. Rehabilitation of the work of a financial institution is not always carried out, but only when it is possible to avoid bankruptcy, or when a commercial financial institution is classified as significant for a particular region. The procedure is ineffective if the drawdown of the bank's balance matches its balance. The effectiveness of the restoration procedure is determined by the commission of the Central Bank.
The essence of the rehabilitation procedure
The essence of reorganization is to restore the bank's efficient performance without revoking the license of the Central Bank. The Banking Law states that if there are difficulties in the work of the bank, one of the chairmen must report the difficulties to the shareholders. Shareholders are already making a decision either to increase the capital of a credit institution on their own, or to declare financial incapacity with a parallel request for reorganization. According to the Director General of the Deposit Insurance Agency Isaev, he rarely had to deal with such actions of banks. In most situations, the problems associated with the liquidity of a financial institution are carefully hidden.
What do sanators do?
As mentioned, a sanator is a person or business that is responsible for restoring a bank that is in trouble. At the same time, the interests of depositors are protected. Ideally, after the reorganization of the enterprise, each depositor should receive his deposit back. Not only the sanator bank usually works on the procedure, but also the Central Bank itself and the DIA (Deposit Insurance Agency). Through rehabilitation, shortcomings in the work are determined, persons who are guilty of the problems of the bank are removed from the management. Comprehensive financing of the institution is being carried out so that it can cover all its obligations. Sanatoriums themselves receive certain benefits from rehabilitation. We can talk about the provision of a loan by the Central Bank at an incredibly low interest rate.
Tasks of sanatoriums and DIAs
The reorganization procedure in Russia is being carried out by the DIA. The bank-sanatorium can take part in the procedure. This is a financial institution (it is much larger than an institution that is on the verge of bankruptcy), which is ready to take on part of the financial obligations of the latter. Alternatively, level upliquidity can be carried out at the expense of attracted funds from investors. When the responsibility for the financial situation of a bank that is on the verge of bankruptcy falls on the shoulders of a sanatorium financial institution, the DIA takes on the responsibility of forming a new management apparatus. After this task is completed, all responsibility is removed from the Deposit Insurance Agency. Financial recovery cannot last more than 18 months. It can be extended for six months only if this decision is made by the arbitration court. The Central Bank determines whether reorganization will take place or not in this particular case. It is not difficult to figure out what depositors should do during the recovery period of the bank, since this process does not affect the services of a financial institution and partnerships.
What are the procedures for restoring liquidity?
In accordance with the law, reorganization is a set of measures that should raise the bank's liquidity level, thereby saving it from bankruptcy in order to maintain its license. A bank sanator is an entity that improves the financial and economic situation of the debtor. In parallel, all the requirements of creditors are satisfied through lending, restructuring of the enterprise with debts and capital, inclusive. It is allowed to change the organizational, legal and production structures of the debtor. Statistics show that in the long run, there are much more bankruptcies. Considering the question of what sanitation means for a sanitator, it is worth saying,that this process is financially very costly and requires a lot of effort and time.
What does sanitation mean?
Rehabilitation is a very extensive procedure, during which tasks of various types are implemented. We can talk about the re-profiling of activities and the closure of unprofitable programs. A deferral is issued or a new installment agreement is concluded in terms of repaying debts. There may be a partial write-off of debts, which is provided for by the settlement agreement. Receivables must be liquidated and assets restructured. Partial sale of property is widespread. The investor, in case of raising funds, assumes responsibility for paying part of the debt. He undertakes to solve problems in terms of fulfilling financial obligations. During the restructuring of the bank, personnel who are not directly involved in the sanation procedure itself may be laid off.
Why does the government support banks?
Rehabilitation and bankruptcy are not just incompatible, but also opposite phenomena. If bankruptcy is the complete closure of a financial institution, which hits the pockets of all investors and customers, then reorganization is the restoration of the enterprise's efficiency. The external format of the financial institution does not change. The Russian government, including the Central Bank, has its own interests in matters of reorganization. Helping small market participants, it increases confidence in the domestic banking system. If a bank that is indifficult circumstances, is very significant for the region, then its bankruptcy can hit entrepreneurs, and, consequently, the regional economy. At the moment, the procedure in Russia is performed by only a few large financial institutions, which are not particularly eager to play the role of missionaries due to significant financial costs.
Main difficulties
The bank sanitizer is a larger bank with high liquidity that bails out a troubled institution. Problems in restoring performance are mainly related to incorrect actions on the part of bank managers. They are either involved in illegal activities, or they have property of dubious origin on their account. Making assets liquid is not always possible. In addition, as practice shows, the issued loan is not always enough to rehabilitate a financial institution.
What benefits does the sanator bank get from the rehabilitation process?
Banks-sanatoriums carry out reorganization solely in their own interests. By becoming patrons of troubled financial institutions, they receive new assets for management. It is worth mentioning the attractiveness of sanatoriums for clients. The presence of the status indicates the trust of the government, and therefore, attracts investors, raises the level of trust in the institution. He alth resorts always enjoy state support and have certain advantages. At the same time, serious requirements are also imposed on the “savior” bank in the lending and fulfillment segment.their obligations. This has a positive effect on the reputation of the institution, increases its level of competitiveness in the domestic financial market.
