Claims rights for loans, real estate, land plots. What and how does the Deposit Guarantee Fund sell
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Withdrawal of a bank from the market does not necessarily imply its liquidation. A bank, for example, can be sold to a qualified investor or transferred to state ownership. However, if there are no buyers willing to buy the institution, the liquidation procedure begins. This process includes the mandatory sale of all assets on the bank’s balance sheet. The funds received from the sale will be the source of settlements with the bank’s creditors, who cannot claim guaranteed reimbursement of their deposits.
The main asset of the bank is its loan portfolio. So any outstanding loans on the delisted institution’s balance sheet are subject to trading. But, in addition to loans, the bank may own quite real property: vehicles, land plots, real estate, hotel complexes, objects of unfinished construction, etc.
The sale of assets, regardless of their type, has been carried out since 2016 through open online auctions based on the Prozorro.Sales electronic system.
“FGVFO is one of the largest organizers of online auctions in the state electronic trading system Prozorro.Prodazhi. The Fund announced the first auctions for the sale of assets of bankrupt banks in the system seven years ago – at the beginning of November 2016. At that time, the Fund managed the assets of dozens of liquidated banks. Online auctions in the system helped the FGVFD realize assets worth more than 28.6 billion hryvnias and return these funds to the creditors of these banks,” said Serhii But, CEO of Prozorro.Sales.
At one time, Prozorro.Prodazhi was created precisely at the request and with the participation of the Guarantee Fund. The system was launched as a “pilot project for the sale of assets of insolvent banks”, which was implemented by the Fund, the National Bank of Ukraine, the then Ministry of Economic Development and NGO “Transparency International Ukraine”.
Over the years of operation, the system has gained the trust of buyers due to the simplicity and speed of execution of transactions, while the electronic format does not require the physical presence of participants at auctions. Tenders must be conducted taking into account the principles of fair competition; publicity, openness, transparency; non-discrimination of participants and objective and impartial selection of the winner, as well as prevention of corruption and abuse.
If the property is a completely understandable asset for a potential buyer, then what can be interesting about the purchase of loans?
“In the overall structure of the assets of banks under the management of the Fund, 97% are loans of legal entities and individuals. Of course, the best option is when borrowers repay their loans, including using our restructuring program. However, as statistics show, repayment of loans is only a tenth part of the total proceeds to banks that are being liquidated. Therefore, most of our lots are claims rights. For an investor, the key value of a non-performing loan is the collateral. After all, if the borrower does not repay his debt within the specified time, the law provides for the possibility for the creditor to foreclose on the pledged property,” explained Olga Bilay, Deputy Managing Director of the Deposit Guarantee Fund.
According to the data of the Guarantee Fund, since 2016, the total amount of proceeds from the sale of assets of liquidated banks amounts to more than UAH 35 billion. As noted by the CEO of Prozorro.Sales, active bidding was also held during 2022-2023, which makes it possible to return funds to bank creditors even in wartime conditions. And this, in turn, contributes to higher trust in the banking system and in general in the state institutions of the country.
According to the Guarantee Fund, during the full-scale war, the total amount of proceeds from the sale and management of liquidated banks’ assets has already reached UAH 10.9 billion. More than half of this amount – UAH 6.4 billion – was obtained from sales.
- UAH 6.5 billion – from the sale of property;
- UAH 1.2 billion – from repayment of loans;
- UAH 1.7 billion – from the redemption of securities;
- UAH 0.2 billion – from property lease;
- UAH 1.3 billion – from other sources.
In 2022, 90% of sales fell on real estate, and only about 10% are loans and other assets. This year, the situation is the opposite: real estate accounted for only 25% of sales, and the rest are realized loans.
Funds received from the auctions are used to repay the claims of creditors of banks that are being liquidated. Therefore, settlement prospects, in particular with legal entities, directly depend on the quality of the assets of the liquidated bank. Since the beginning of the full-scale war, more than 10 billion hryvnias have been transferred to bank creditors.
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