Banks have simplified the withdrawal of assets frozen abroad into a separate legal entity

Legislators have made it easier for banks to withdraw assets frozen abroad into a separate legal entity. According to the adopted amendments, shareholders who disagree with the reorganization will no longer be able to demand to buy back their shares, and individuals to withdraw their funds ahead of schedule. For legal entities that have more than 10 trillion rubles on these deposits, the right to withdraw funds remains. But lawyers believe that the main risks of reorganization for banks have been removed by the new rules.

The State Duma approved in the second reading amendments to the law allowing sanctioned banks to transfer assets and liabilities frozen in unfriendly countries in the form of obligations to foreign creditors into a new legal entity.

In particular, the right of shareholders who disagreed with the reorganization to demand the repurchase of their securities is excluded. In addition, the right of individual creditors from friendly countries to demand the return of their funds is retained only if provided for by the agreement. Legal entities from friendly countries still have the right to demand funds in case of reorganization. Its term is extended until the end of 2024.

According to a Kommersant source in the banking market, the approved provisions have become a compromise between banks and the regulator. Bankers asked for the opportunity not to return deposits to both individuals and legal entities from friendly countries ahead of schedule, and the Central Bank was generally only ready to refuse to buy back shares. The position of bankers at the congress of the Association of Banks of Russia (ADB) in May was presented by the deputy chairman of the board of VTB Dmitry Pyanov (see Kommersant of May 29). At the same time, Deputy Chairman of the Central Bank Olga Polyakova said that the law was working without amendments, one of the systemically important banks had already passed the procedure.

At the same time, according to published reports as of June 1, the amount of deposits of legal entities in sanctioned banks is quite impressive. Thus, they are estimated at VTB at 4 trillion rubles, at Sberbank – at 3.4 trillion rubles, at other credit institutions – more than 3 trillion rubles. It is not possible to single out how much falls on companies from friendly countries and, accordingly, can be presented for early return.

According to independent expert Olga Ulyanova, in the system as a whole, the volume of frozen assets does not exceed 5-7% of total assets, but in some banks the proportion can be significantly higher. “The reorganization and withdrawal of frozen foreign assets from the main balance sheets of banks will allow these banks to clear the results of their operating activities from the influence of one-time force majeure factors, as well as to more flexibly and freely apply mechanisms for their return or monetization to the withdrawn assets, including such mechanisms that are not commonly used in day-to-day banking,” she explains.

These mechanisms, according to the expert, may include exchange schemes, resale on the over-the-counter market, conversion, and so on. Mr. Pyanov previously noted that the procedure for removing blocked assets and liabilities from the balance sheet could have a significant positive impact on VTB’s capital, and we are talking about “hundreds of billions of rubles.”

The scheme established by the law involves the creation of an SPV (special purpose vehicle) to which frozen assets will be transferred, due to which it is planned to pay off debts to non-residents. According to Akderli Legal partner Daniil Akderli, “the legislator chose the reorganization to “dump” the frozen assets for a reason: to transfer obligations, rights and entire contracts with non-residents separately is a rather long process, and also difficult to implement, since it requires the consent of such non-residents.”

The main risks for banks associated with the requirements of shareholders for the repurchase of their shares and the requirements of creditors for the early fulfillment of obligations in the event of reorganization are leveled by the adopted amendments. Only one significant risk remains, Mr Akderli said: additional fines and restrictions on banks for allegedly circumventing the sanctions that led to the asset freeze.

Maxim Buylov