Should Trust be trusted?

The Central Bank informed on Thursday, January 15, that former owners and the management of Trust Bank were suspected of asset withdrawal. The Central Bank respectively informed the Prosecutor General’s Office and the Ministry of Internal Affairs. The amount of the withdrawn funds is currently being ascertained.

The Deposit Insurance Agency selected the investor for prevention of bankruptcy of Trust Bank in December of the previous year. FC Otkrytie Bank was chosen. According to Sergey Vorobiev, Deputy Chairman of the Board of Trust, Bank, the clients reacted positively to the news that the largest private banking group of Russia – the Otkrytie – will reorganize the bank.

The actions of the former owners and management of the bank, performed over a long period of time, is what caused financial problems for the credit organization. The use of “schemes” of crediting the borrowers, which conduct no actual business activities, and financing the investment projects, which generate no income, is suggestive of asset withdrawal. In the course of the previous year, the Central Bank kept pointing out the underestimation of the credit and other risks on invested funds to the bank, but neither the management nor the owners of Trust took any adequate measures to remedy the situation.

Mikhail Chugunov, Associate of the Law Firm "YUST", comments on the situation: “When speaking of such law-application practice, one should consider several branches of law, first of all – penal law and civil law.

From the point of view of penal law, such actions (depending on specific actual circumstances) may be qualified by the respective Articles of the Penal Code of the Russian Federation as fraud, deliberate bankruptcy, falsification of financial documents and accountability of the organization etc.

Civil practice mainly amounts to contesting the debtor’s transactions for general reasons established by the Civil Code of Russia as well as for special reasons stipulated in the Bankruptcy Law.

We don’t have many cases of employing of the procedure of prevention of bankruptcy of the banks with problems yet, and we can merely theorize on the practice for such cases. The new management of the bank (if it discovers sufficient legal grounds) will most likely contest for general reasons the deals, within the framework of which the withdrawal of funds was done.

The discovered facts of asset withdrawals from banks often result in cancellation of the bank’s license to banking activity, appointment of external administration (in most cases, the Deposit Insurance Agency is charged with managing such banks) and the subsequent claims moved by the external administration to contest the bank’s deals with its counterparts. Such claims are often based on giving preference to some creditors against others, a suspicious deal, involvement of the banks’ affiliated entities etc.”.