The Duma committee says in an explanatory note that the amendments are aimed at streamlining the regulatory framework for bankruptcy procedure. They passed through parliament's lower chamber in their first reading on December 18, 2002, and have since then been under review for a second-reading vote.
The amendments revise procedures for avoiding insolvency of banks and other crediting institutions. Thus, they prescribe that if faced with the risk of insolvency, a bank shall immediately draw up a plan of actions toward its financial rehabilitation and report the situation to the Central Bank without delay. The Central Bank, for its part, is vested with the right to demand of the crediting institution at hand that within ten days' time, it should convene a Board session and decide on measures that would reinvigorate it financially.
The insolvency prevention measures preceding the revocation of a banking license are as follows: financial rehabilitation, the appointment of interim management, and restructuring.
After having been urged by the Central Bank to launch financial rehabilitation measures, a crediting institution shall not conduct any banking operations, such as distributing profits among the cofounders or paying dividends.
And after its license has been revoked, an insolvent institution shall be run by an interim administration handpicked by the Central Bank until a new manager is selected on a competitive basis or an arbitration court's ruling on the appointment of a liquidator comes into force. The interim administration may be formed from executives of the government-run Deposit Insurance Commission Inc, also known by its Russian. acronym, ASV. The provisional administration is entitled to access any relevant information and documents on the insolvent bank's operations as well as any of its offices, sealing them off if necessary. The failure of management or staff to meet the interim administration's demands would constitute a criminal offense, punishable in accordance with federal laws.
The interim administration's outlays shall be covered above all other expenses.
The Duma Committee for Crediting Institutions has fully revised the Insolvency Law's Article 5, setting forth the principles of insolvency procedure. This article has been made more specific on the procedure of filing a bankruptcy claim with a court of arbitration. After the court hands down its ruling, a manager, selected on a competitive basis, takes over to run the bank in question up to the point its liquidation gets officially registered. The manager's responsibilities involve making an inventory of the bank's assets, inviting independent evaluators to evaluate the assets, analyzing the current financial state, and collecting debts from third parties. He/she is also supposed to register demands from the bank's lenders and to search for and recover its property from third parties. The caretaker shall report to the court of arbitration and the creditor commission.
In case a crediting institution fails to act on the Central Bank's demands to start financial rehabilitation, its management shall face subsidiary responsibility. If it is established that an institution has gone bankrupt through its founder's fault, he/she will be banned from buying 5%-plus stakes in other banks for a period of ten years.
If they get through parliament, the amendments to the insolvency law will enter into force within three months of their publication, and are not to be applied to banks that have filed for bankruptcy before then.
