The banks were saved as the central bank credit is determined accumulated losses exceed the real value of capital and reserves of the institution under special control record in the financial statements have been audited and the nearest point end of the credit activity can cause unsafe credit system.
Most important tasks
The banks decide the fate of particular controlled entirely dependent Governor. The Governor will determine the real value of capital and reserves of banks are under special control; decisions need to be capitalized to secure additional capital to meet and maintain the legal adequacy ratio all prescribed; decide which credit amount or the amount specified SBV should contribute capital and purchase shares; decide the form of capital contribution and share purchase and implementation time capital contribution and share purchase section.
If so, then the responsibility of the Governor is so hard, because of the risk of a huge decision, it is difficult to ensure that these decisions will be completely accurate, given banks overcome insolvency clause to return to the normal state of business.
However, the Governor has the "float" of its own to ensure the safety of their decisions. That is: for refinancing loans, special loans, permit the temporary application of a number of indicators of safety in the operation of the credit is not equivalent to normal other support measures to address the temporary difficulties than expected.
The new central bank said banks borrowed money can be used for the purposes
Actually very difficult to assess the effectiveness of these measures, as these measures are not publicly known only new central bank loans money to banks is not used for the right purpose, or non-effective.
Experience in some countries from the financial crisis showed that the central bank can loan banks to passcrisis, but the conditions are very demanding loan, the bank must demonstrate that the liquidity problems are temporary and have the capacity to overcome this situation. Even the National Assembly should decide to put on the public "float relief" bank.
Intervention
In the case of direct central bank capital contribution, purchase of shares of banks, the problem arises if lending is inefficient SB how to handle the credit for this, would not continue to borrow, the This credit can live forever if these measures help from the central bank or not; central bank should continue to intervene in the fate of the credit or not, or to the operation of financial institutions by market rules, if too weak then withdrawn from the market.
Before considering the help of the central bank in the capital contribution, share purchase, there are many other solutions are being implemented as mergers and acquisitions, purchase loans, more open foreign investment.
And there should be too worried about the consequences when banks are not bankrupt or when there is deposit insurance mechanism to protect the interests of depositors when banks lost liquidity.
In addition to direct capital contribution, share purchase, the central bank may also specify a number of other banks have equity of the organization, the decision to transfer funds, banks equity in the capital contribution and share purchase part of the designated banks.
The credit required to contribute capital and purchase shares of other banks like it or not is the administrative measures of the central bank intervenes heavily in the banking operations, the loss of autonomy of the banks.
Furthermore, SB unclear criteria used, what method to evaluate this indication is accurate, consistent and effective. If only the banks making losses because of this decision, the central bank's responsibility for yourself? The shareholders have the right to specify what banks before the intervention of the central bank to the right to use their capital?
These questions need to be clarified before the central bank decided to offer a new mechanism.
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