On the policy of the Central Bank on bank resolution

On April 21, 2017 the Central Bank of the Russian Federation (CB of the RF) withdrew from the credit institutions Bank «Obrazovanie» and «FINARS Bank» a license to conduct banking operations and appointed temporary administrations.

Lately following banks were revoked licenses: «Rosenergobank» (10.04.2017), «Tatagroprombank» (05.04.2017), «Neftyanoy Alliance» (14.03.2017), «Economic Union Bank» and «Trade City Bank» (13.03.2017). Total for the first quarter of this year 14 banks and non-bank credit institutions were revoked the licenses. The chronology of events of the last month shows that the Mega-regulator continues traditionally to clean up the banking sector from bad organizations.

In general, for the period from January 1, 2015 to March 31, 2017, the CB of the RF withdrew the license from 294 banks and non-bank credit institutions. According to experts of the banking sector, at such rates the banking market will be cleared of unreliable credit institutions within the next 2-3 years. As a result, about 400 credit institutions will remain in Russia.

Currently, the Mega-regulator considers as the most common types of fraud in the banking sector the use of unreal borrowers, schemes with loans to retail borrowers, manipulations with deposits. The main reasons for the revocation of licenses are: financing of terrorist activities, money laundering, illegal and risky operations, unreliable statement, fraud, «capital holes», unsatisfactory financial standing, questionable credit policy etc.

The Central Bank of Russia has developed a package of documents in the form of a draft law, which describes the process of financial recovery of banks. Currently, the second reading of the law is expected in the State Duma. According to the developed proposals, the CB of the RF adopts a role of an active participant in the rehabilitation of banks. In case of appearance of signs of financial instability in a bank the Mega-regulator will be able to send there its representatives for assessment.

In addition, the CB of the RF will receive the right to establish LLC «Upravlyayushchaya kompaniya Fonda konsolidatsii bankovskogo sektora» (LLC Managing Company of the Fund of the Consolidation of the Banking Sector). The Fund will be entrusted with the task of preventing of bank bankruptcy. In view of this the Managing Company may be transferred shares and other property of a bank under trust, it will perform trust management of shares (stakes) of credit institutions, requirements for subordinated loans (deposits, credits, bonded loans) and other credits, deposits, bank guarantees.

It is planned that these shares and other property of recovered bank will be purchased by the CB of the RF. In addition, the Mega-regulator will be given the right to grant subordinated loans to the rehabilitated organization, issue bank guarantees, sell shares (stakes in the authorized capital) of credit institutions, where measures to prevent bankruptcy are implemented. Financing for the process of bank resolution is entrusted to the Fund of the Consolidation of the Banking Sector. Money in the fund will be formed from the cash of the Bank of Russia. They will be separated from the rest of the property of the Central Bank.

The ultimate goal of resolution of "sick" banks will be their recovery. After a full recapitalization the rehabilitated bank will be sold at an open auction to a new owner. It is believed that the use of a new mechanism of banks will allow minimize the expenditure of the state's funds planned for financial recovery.

The processes, taking place in the banking sector, testify to the existence of high risks in the industry. It is very important to entrepreneurs to be careful by choosing a bank. In particular, do not trust banks that conduct too much aggressive credit policy or banks that issue deposits at very high interests; do not trust young banks; do not work with banks that do not have a wide system of ATMs and a branch network. In addition, it is necessary to monitor constantly the market situation in the banking sector, check regularly the information on the standing of the bank, whose services an entrepreneur uses, as well as counterparty's bank for their financial stability – among them with the help of the System Globas-i®.

Want to be healthy? Pay!

The Russian commercial healthcare market is up and running.

According to research results, the majority of Russians don’t rely upon for free comprehensive qualified medical attention from the state, that is why they have to turn to commercial healthcare.

Soviet heritage. The system of free public medicine existed in the USSR has been fully outlived in the post-soviet period. Ambitious public health service reforming initiated by the Government in 2010 involved significant budget savings. The main goal of the reform was to improve the compulsory health insurance system (CHI). Along with insurance payment hike from 3,1% to 5,1% it was decided to scale down types of treatment financing directly from the budget and pay for them by means of collected dues. At the same time the doctors’ average salaries began to increase – funds for these expenditures had also to be received from the CHI budget. As a result, hospital stock in many regions began to reduce, small healthcare institutions were closed and professional services began to concentrate in large medical centers; downsizing of medical workers took place later. Today the majority of Russians don’t suppose to get full range of free medical service in case of sickness.

Stand and deliver. According to the KPMG’s Views on Development of Commercial Health Care in the Russian Federation in 2017-2019, the mentioned sector increased by more than 51 bln RUB (8,2%) – following the results of 12 months its volume amounted to 622 bln RUB. The experts forecast further increase for the short-term but a little bit slower - by 6% annually. Among the factors contributing the market growth are continuing decrease of availability and quality of medical services under CHI, reduction of insurance coverage within the frameworks of corporate voluntary health insurance (VHI) policies in large companies and complete rejection of VHI in a number of medium-sized companies. State clinics continue to shut down and the share of commercial services increases in the rest of them. At the same time, disadvantages of health care sector funding are obvious. These factors altogether lead to increase in occupancy rate of healthcare centers in commercial medicine.

Innovations not only in medicine. Owners of commercial healthcare centers are of the same view with researchers and the majority of them speak about intentions to expand business: they argue that increase in customers will be ensured due to reduction in availability and quality of state services. Business models of multi-field clinics providing all necessary medical services at a single location become more and more popular in commercial healthcare. At the same time, it is commercial sector that is able to improve in accordance with medical and technological expectations of clients, such as availability of online appointment system, electronic medical records and mobile application. Increase in prices in the sector can be the factor limiting demand on commercial medical services, however even this will not be able to reduce the market development rates.

State and business. Recently the Ministry of Health of the Russian Federation initiated the discussion of new mechanism of state-commercial cooperation for budgetary healthcare institutions. The Ministry proposed to confer them a right on establishment of subsidiaries vesting real estate released during the reform in. These structures could cash on commercial services and will be controlled by the founders. Speaking long-term, this initiative can be successfully realized and improve medical services quality. However, going into action is required transparent and clear rules. Obviously, continuous reduction in state healthcare is imminently, that is why effective teamwork of the state and business on the matter becomes the most important for the whole population of the country.