Escrow accounts went into business

Banks have begun offering escrow accounts to legal entities. Since its introduction as part of shared construction, this tool has proven itself well, and now credit institutions are ready to use it in transactions where settlement protection is needed. The mechanism eliminates the need for advance payments and bank guarantees. The scope of its application can be very different: from support of procurement contracts to mergers and acquisitions (M&A). The use of escrow accounts makes it possible to obtain loans from banks as part of transactions at a low interest rate – on average up to 4% per annum.

Sberbank announced that it has expanded the scope of escrow accounts beyond the acquisition of housing during the construction phase (214-FZ “On Shared Construction”). “As part of the piloting, Sberbank opened more than 230 such accounts worth about 12 billion rubles, including the first transactions with escrow lending outside 214-FZ in the amount of 1.1 billion rubles,” the bank explained. Transactions include, for example, financing of suppliers at a reduced rate using funds placed by customers on escrow accounts, purchase with control over the intended use and replenishment of the account by a third party, sale of a pledged asset with a settlement guarantee.

“The mechanism of lending under escrow involves a special interest rate on a loan to a contractor, by analogy with loans to developers (214-FZ). If the size of the deposit is equal to the size of the loan, the benchmark for the rate is the market value minus the discount rate of the Central Bank,” Sberbank explains. “If the size of the deposit is more than the loan to the contractor, then depending on the excess, the rate may drop to 0.1%.”

Of the top 10 banks by assets, the practice of using escrow accounts in the corporate segment was also confirmed by Sovcombank and Moscow Credit Bank (MKB). Single cases of application were noted in Promsvyazbank.

MKB uses the mechanism of escrow accounts (in addition to 214-FZ) for transactions with non-standard conditions for depositing and disclosing funds: “We are seeing an increase in demand for transactions using escrow accounts.” “The use of the instrument is relevant in many areas, including in trade finance, the execution of government contracts, as well as in mergers and acquisitions,” says Stefan Yasnogorodsky, head of the real estate department of the corporate investment business of Sovcombank. “The mechanism eliminates the need for advance payments and the use of bank guarantees of fulfillment of payment obligations”.

However, most of the top ten banks do not yet introduce escrow accounts in the corporate segment or do not want to advertise this practice. “Weak penetration of the scheme is due to the fact that the format is not always convenient for large and medium-sized businesses. In fact, the partner’s money should work in the project at the stages of its implementation, since each project is unique and in Russian realities is carried out in the most difficult economic conditions,” says Ilya Zharsky, managing partner of the Veta expert group. “In the case of the corporate segment, it is easier for partners to agree by writing there are other options for liability for non-fulfillment of obligations in agreements.

At the same time, the use of the mechanism of escrow accounts is beneficial for both the bank and the client, experts believe. “In such a scheme, the bank does not bear any additional risks, since it acts only as an intermediary, while it gets access to free balances on escrow accounts for a while,” explains Ksenia Yakushkina, director of banking ratings at Expert RA. protection against non-compliance by their counterparty with the terms of the contract.

Ksenia Dementieva, Polina Trifonova