March 2014 remember the bankruptcy of two major banks, which became a harbinger of a future financial crisis.
In March the insolvent was recognized BROKBUSINESSBANK approximate to the family of Yanukovych Sergey Kurchenko, a few weeks later, thunder boomed and the Bank “Forum” Vadim Novinsky.
If BROKBUSINESS by that time was already “gutted”, and the shareholder has fled to Moscow, the Bank “Forum” was a working Bank, which carried out all the requirements of the customers, and the owner publicly stated about the readiness to inject funds for its capitalization.
So “Forum” became the first Bank with real billion dollar cost, which the insurance Fund began to be practiced in the management of assets, and the market is “run in” a new scheme for avoiding the obligations.
Using these schemes for several years in the banking sector will happen the largest redistribution of capital from the big privatization.
Sample Bank Novinsky confirms this. Recently, the Deposit guarantee Fund sold the last assets of the Forum, and soon the Bank will be liquidated.
The results are revealing: the Bank’s assets after the recognition of its insolvency was estimated at 7 billion, but in the end money is not enough to calculate with individuals whom the Bank owes 5 billion.
How that was possible, and what was left in the “Forum” at the finish line? About this in the article EP
In February 2014, the national Bank was headed by Stepan Kubiv. He had to make the first decisions on the removal of banks from the market.
“Forum” at that time was far from the worst Bank in the market as the quality of assets and liquidity. Because of this in the banking environment, the decision on the “Forum” became known as “political.”
Kubiv does not explain that became the basis for this decision. Questions EP the former head of the NBU is ignored.
“I would not like unfounded to blame someone, but I’m sure he got a team from the most senior officials. it was not his sole decision,” says Novinsky.
“Forum” was a major Bank. Among 180 Ukrainian banks, he was closer to the second top twenty in terms of assets. In March of 2014 with assets of 10 billion UAH of net liabilities of the Bank amounted to 9.7 billion UAH.
However, such figures were only “on paper”, in reality the Bank’s assets were worth significantly lower. According to the interviewees EP, size contested by the Bank in the courts of liabilities then amounted to 5 billion UAH.
Despite significant challenges, a working portfolio no NPL (Non-performing loan, non-performing loans) amounted to about 7 billion UAH. Approximately the same amount, the independent valuers have assessed the assets and property of the Bank after the introduction of the interim administration.
Novinsky briefly owned a “Forum”. He bought it from German group Commerzbank in autumn 2012. At that time the Bank already had a “hole” in the balance sheet.
“The fact that the Bank had problems with assets and liquidity, it was impossible to hide. We were engaged in a program of recovery a year before. We immediately invited the NBU to check, ordered alternative KPMG audit, which showed all the problems. We, the NBU has developed a plan to solve the problem,” says a former head of the Bank Alexander Morozov.
The failed bail-in
At the time when the Bank entered temporary administration of the Deposit guarantee Fund, in the possibility its elimination, few believed, including the Novinsky.
The companies, the shareholder of which he was, the accounts in the “Forum” was more than a billion hryvnias at the “old rate” of about 10 USD per.
“We have until recently thought it impossible. The Bank was in good condition. Yes, there was the crisis related to the revolutionary events was a significant outflow of deposits, but we had an agreement with the NBU.
With its small support, we would have safely passed the crisis. I all employees were asked not to take money from the Bank, and nobody did. In addition, all our companies have not brought any hryvnia from their accounts, and hundreds of millions,” says Novinsky EP.
Even after the introduction of temporary administration it was difficult to believe in the elimination. Kubiv at the closed meeting told reporters about the rescue options “Forum” and Novinsky expressed willingness to capitalize the Bank at $ 110 million.
Novinsky is expected that part of the funds needed to bring the ratios back in order, he will be able to receive a stabilization loan from the NBU. About this, according to Morozov, it was agreed with the previous head of the NBU Igor Sorkin. Sorkin led the national Bank in the last year of Viktor Yanukovych’s presidency – from January 2013 until 24 February 2014. As head of the national Bank, Stepan Kubiv appointed Sorkin his adviser.
“The agreement was reached with the NBU, while the head was Sorkin. He was present on the key Board of the NBU “Forum” as a counselor Kubiv. When the key decision was taken was attended by Kubiv and sat next to Sorkin.
I was very comfortable. I say, “Stepan Ivanovich, well, here’s Sorkin, so how was the system of agreements, we all affirm”. But they have their not adhered to,” says frost.
In addition, Ukraine already held the first bail-in of large deposits were converted into shares of the Bank with a compulsory option to purchase.
“We have conducted multiple meetings with Cubisim and Beekeeper (Vasiliy Pasichnyk, the former head of the Deposit guarantee Fund. – ). Reached agreement on the establishment of a transitional Bank. A Protocol was signed, where recorded obligations of the parties. They say: “you Can transfer the money to us for confirmation?”. “I can”. We transferred $ 50 million.
What did the national Bank? He went with a claim against me in court and arrested money, despite the agreement. Pasichnyk Stepan Kubiv and lied to me. Not only me, but also investors. I was under the impression that initially, when they signed the Protocol with me, didn’t want to implement it,” says Novinsky.
His version of events Kubiv EP are not told, but based on statements from an official of the regulator, there were several reasons for the failed rescue of the Bank.
The first is “the absence of any legal grounds for performing the stated of the restructuring on the conversion of foreign currency obligations in local and placement of new issues of Bank shares in return money lenders”.
The second is the lack of evidence of the agreements with the NBU’s support.
Third – the absence of evidence that Novinsky UAH 600 million.
However, Novinsky says that the grounds were false. As proof he gave of EP documents that are supposed to testify to the contrary.
Why “Forum” decreased
In the end, the negotiations of the guarantee Fund and the NBU with potential investors were unsuccessful. The Bank suddenly went into liquidation.
“When the Bank went into liquidation, there was no electronic system sales or restructuring options, and the formation of collective bodies was in its infancy.
“Forum” was the Bank, which worked out procedures that were only prescribed in the regulations, but was never implemented,” explains Deputy managing Director of SCF Svetlana Rekrut.
To the case with the “Forum” of the assets of this magnitude in the guarantee Fund has never been.
Independent appraisers estimated the assets of the “Forum” UAH 7.1 bn. The total amount of creditors ‘ claims – 9,16 billion. The requirements of natural persons amounted to UAH 5.1 billion. Approximately 12 thousand depositors had in the Bank saving more than 200 thousand UAH for the total amount of UAH 2.3 bn.
It seemed that the chances of depositors individuals to their money is quite high. However, the Bank’s portfolio was rapidly deteriorating: the borrowers began to look for opportunities not to pay the loans.
“The basic rule in the work with troubled assets work needs to be delivered very quickly. Less than days overdue, the more chances to return the money. When the Fund entered the Bank, customers a month or two couldn’t figure out where to pay them.
The Fund is expected to be a queue of buyers. and will raise the price of assets? What did the debtors? They understood that the more the delay, the more ships, the cheaper the appraiser will assess his credit. So they stupidly went into denial,” says one former Vice Chairman of the Bank on condition of anonymity.
As the Bank emptied debtors
“Forum Bank, for example, which we first saw how can be displayed the asset is used for this purpose, the bankruptcy of borrowers. Our first acquaintance with all the schemas we have encountered in the future, happened here,” said the Recruit.
One of the most popular schemes of bankruptcy of the debtor.
For bankruptcy deposits for loans got Bank, and was sold at auction and organize auction at a reduced price for affiliates around the world for qualified lawyers.
Thus, by the autumn of 2016, “the Forum” of the total loan portfolio of UAH 10.5 billion on the bankrupt were liabilities to 5.9 billion UAH.
Some borrowers, who did not want to pay the debts, resorted to the “help” of the judicial system. This is well illustrated by the example of the pool of loans of the group WOG, which was one of the largest debtors of the Forum.
The courts did not allow the Fund to sell assets for four years, and when the terms of liquidation of the Bank came to an end, the asset carrying value of UAH 1.7 bn was redeemed with the discount of 77% over 404 million UAH.
“Judicial and extrajudicial work more difficult for us than for a private owner who can afford to negotiate in the courts to pay private performers. Unlike our opponents, we are severely limited in our actions. In the end, the process is delayed and our assets are losing value,” says the Recruit.
Another important reason for which the Foundation is not able to realize assets more expensive, the lack of demand for distressed assets.
Active retail asset sales began in 2017 with the advent Prozorro-sales. The platform ensured the transparency of trading, but the second basic problem is the lack of buyers it has not solved.
Only buyers of loans in the retail sales were often borrowers themselves.
How often the buyer of the loan was connected with the borrower? “Always,” replies the interlocutor of EP familiar with the process of elimination. According to him, the competition was in a few cases when I was a corporate war.
Asset, into the guarantee Fund, significantly impaired because the debtor knew that I would be able to redeem its debt at a discount of 80%.
Assets for which there was no demand even with 80% discount, fell into the “pools” and sold even more markdowns.
On 21 February, the Fund sold the last pool of assets Bank Forum with a carrying value of UAH 12 billion for 125 million UAH.
The practice of “polerowanie” assets has enabled the Fund to meet deadlines and to sell assets before the end of the period of liquidation of the Bank, but discounts of 99% has not solved the problem of depositors.
What was left investors
Of creditor claims in the amount of 9 billion UAH, according to the Foundation, managed to return 3,645 billion.
From 3,645 billion UAH UAH 2.7 bn Fund left to themselves. The same amount it previously spent on the payment of guaranteed deposits of up to 200 thousand UAH. Another 486 million, the NBU received for the previously issued Bank refinance.
The fourth stage investors, whose deposits exceeded 200 thousand UAH was paid 410 million UAH. It is envisaged that the will be paid the same amount. That is a big part of their savings they will receive.
On the background of the situation with other banks this is a good result. The payment of the deposits of the fourth stage occurs in rare cases that usually tells about a relatively high quality of the Bank’s assets.
A few months later, a legal entity of the Bank will be liquidated, and their money will not return thousands of depositors. About 2.4 billion was in the Bank business, more than 1 billion UAH on the accounts of companies connected with Novinsky.
The elimination of “Forum” shows how imperfect was the system of guaranteeing deposits, with which Ukraine has started the largest in its history, the cleanup of the banking sector.
Corrupt courts, political revenge, lack of legal framework and flexibility in the decision-making of state agencies paid for all this investors Forum.