Sanatorium is ... What is a bank sanation? What is a sanatorium bank?

"Sanitation" and "sanatorium" are words that cause fright on the faces of many investors, especially in the era of the global financial crisis. In literal translation, "sanation" is interpreted as an improvement. If you impose a definition on the banking sector, then it can be interpreted as a recovery of a financial institution. A sanatorium is a person or an 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 on the balance sheet in the bank corresponds to its balance sheet. The effectiveness of the restoration procedure is determined by the Central Bank commission.

The essence of the sanitation procedure

The essence of the rehabilitation is to restore the effective efficiency of the bank and without resorting to a revocation of the license of the Central Bank. The Banking Act states that when difficulties arise in the work of a bank, one of the chairmen should report difficulties to shareholders. Shareholders are already taking a decision either to increase the capital of the credit institution on their own, or to declare a 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, problems related to the liquidity of a financial institution are carefully concealed.

What do sanatoria do?

As already mentioned, a sanatorium is a person or an enterprise that is responsible for restoring the work of a bank facing difficulties. At the same time, the interests of depositors are upheld. Ideally, after the reorganization of the company, each depositor must receive back his deposit. The procedure is usually not only a sanatorium bank, but also the Central Bank and the DIA (Deposit Insurance Agency). By means of sanation, shortcomings in work are determined, the persons who are guilty of the problems of the bank are removed from the management. The complex financing of the institution is carried out so that it can cover all its obligations. Some of the benefits of sanitation are obtained by the sanatoriums themselves. You can talk about giving a loan to the Central Bank under an incredibly low percentage.

The tasks of sanatoria and DIA

The procedure for sanitation in the territory of Russia is conducted by the DIA. In the procedure, a sanatorium bank can participate. This is a financial institution (it is much larger than an institution that is on the verge of bankruptcy), which is ready to assume part of the latter's material obligations. Alternatively, raising the level of liquidity can be carried out at the expense of attracted funds from investors. When the responsibility for the financial situation of a bank on the verge of bankruptcy rests on the shoulders of a financial sanatorium institution, the DIA takes on the responsibility for the formation of a new administrative apparatus. After fulfilling this task, all responsibility with the Deposit Insurance Agency is removed. Financial sanitation can not last more than 18 months. It can be extended for six months only if this decision is taken by the arbitration court. The Central Bank determines whether a sanation will take place in this particular case. What to do to depositors during the bank's recovery period is easy to understand, since this process does not influence the services of the financial institution and the partnership.

What are the procedures for recovering liquidity?

In accordance with the legislation, sanation is a complex of measures that should raise the bank's liquidity level , thereby saving it from bankruptcy in order to preserve the license. A bank sanator is a subject that conducts a recovery of a debtor's financial and economic situation. At the same time, all claims of creditors are satisfied at the expense of crediting, restructuring of the enterprise with debts and capital inclusive. It is allowed to change the organizational, legal and production structures of the debtor. Statistics say that bankruptcies ultimately turn out much more. Considering the question of what sanitation means for a sanatorium, it is worthwhile to say that this process is very costly and requires great effort and time.

What is included in the concept of sanitation?

Sanitation is a very extensive procedure, when carrying out tasks of a variety of types. You can talk about the re-profiling of activities and the closure of unprofitable programs. A deferral is made or a new contract is concluded for me in installments in the part of paying off debts. There can be a partial write-off of debts, which is stipulated in the amicable agreement. Accounts receivable are being liquidated and assets are restructured. A partial sale of property is common. The investor, in the event of raising funds, assumes responsibility for the payment of part of the debt. He undertakes tasks in terms of fulfilling financial obligations. When restructuring the bank, staff can fall under the reduction, which does not take a direct part in the rehabilitation procedure itself.

Why does the government support banks?

Sanitation and bankruptcy are not just incompatible, but also opposite phenomena. If bankruptcy is a complete closure of a financial institution that hits all investors and customers, then the rehabilitation is the restoration of the work capacity of the enterprise. The external format of the financial institution does not change. The government of Russia, including the Central Bank, has its own interests in matters of sanitation. Helping small market participants, it increases confidence in the domestic banking system. If a bank that has fallen into difficult circumstances is very significant for the region, then its bankruptcy can strike at entrepreneurs, and consequently, in the regional economy. At the moment the procedure in Russia is performed by only a few large financial institutions that do not particularly seek to play the role of missionaries in connection with significant financial costs.

The main difficulties

A bank sanator is a larger bank with high liquidity indicators, which borrows a troubled organization. Problems in the restoration of efficiency are mainly associated with incorrect actions on the part of bank managers. They are either related to illegal activities, or on their account there is a property of dubious origin. Making assets liquid is not always possible. In addition, as practice shows, the loan is not always enough to rehabilitate the financial institution.

What benefits does the sanatorium receive from the rehabilitation process?

The sanatoriums carry out rehabilitation only in their own interests. Becoming patrons of troubled financial institutions, they receive new assets in management. It should be said about the attractiveness of sanatoriums for clients. The presence of the status speaks of the trust of the government, and therefore attracts investors, raises the level of confidence in the institution. Sanators always enjoy the support of the state, they have certain advantages. To the bank-"rescuer" at the same time, serious demands are made in the segment of lending and fulfillment of their obligations. This positively affects the reputation of the institution, increases its level of competitiveness in the domestic financial market.