What is bank resolution and what does it mean for depositors?

What is bank reorganization: is it good or bad?

Rehabilitation has only positive aspects for clients. The financial institution will continue to operate as before. This will not affect customer service in any way; all their money will remain safe. The conditions for deposits and loans do not change during rehabilitation. As a rule, clients do not even notice that remedial measures are being applied to their financial institution.

But for bankers this procedure is not a positive factor. If clients in this case do not suffer any losses, then the owners and managers lose a lot, namely, ownership of the financial institution and invested capital.

This measure is a cause for concern. Since this procedure is carried out before bankruptcy, this state of affairs may indicate instability of the economy as a whole. This means that large financial institutions have problems with solvency.

On the other hand, this may indicate a high risk of bankers, their dishonesty or incompetence. This problem also indicates inadequate supervision of bank managers. In some cases, all of the above possibilities are not mutually exclusive.

Attention! The collapse of large financial institutions is so dangerous for the country's economy that the state in this case will save them at any cost, even to the detriment of smaller financial institutions. For large banks, this policy may be regarded as encouragement for their high-risk activities. This is a reason for clients to place their funds in accounts of financial institutions that are important to the financial system.

What does bailout mean for investors?

The recovery procedure is used so that the organization can fulfill its previously assumed obligations. That is, citizens, as well as legal entities that were serviced by a certain bank, including storing their savings, will receive an additional guarantee of the protection of their own funds and rights.

In essence, the start of reorganization means that the bank will continue its activities and, most importantly, fulfill its obligations to creditors. In the absence of reorganization, the organization would be declared bankrupt. The consequences would be more unpredictable.

In general, the situation will change as follows:

• the bank will receive additional funds;
• some control will be established over financial activities in order to use funds to pay off obligations;
• deposit rates are not subject to change, obligations are fulfilled in the same amount according to previously concluded conditions.

But for the bank, reorganization is not such a positive thing. Yes, the company will be able to service its debts, but it will also receive a number of obligations to the persons who made the injection. In some cases, we are talking about transferring a share to those who made the investment, and in some cases, about a complete transfer of ownership.

The main consequences of resolution for the management of a financial organization are as follows:

• the organization's management structure will be changed. There may be a reduction in the number of branches, as well as a reduction in employees;
• if recovery does not bring the desired result, the bank must begin bankruptcy proceedings, the consequences of which will be more significant.

At a minimum, the bank's management will be temporarily removed from managing the organization, since it was their actions that led to the emergence of a problematic situation. In addition, the bank will receive certain obligations to persons who will make financial investments.

Read: Assignment of the right to claim debt between legal entities

How to understand that a bank may fall under reorganization?

Care should be taken when choosing a bank. It is recommended to trust your own money only to trusted large financial institutions with an impeccable reputation. It is desirable that the investor be the state or respected shareholders, including foreign ones.

Attention! It is better to store funds in insured accounts. It is not recommended to trust one bank with more than 1.4 million rubles.

To understand whether a financial institution is at risk of recovery measures, you should monitor its rating. A decrease in this indicator indicates the presence of problems. This indicates the likelihood of reorganization in the future.

Reasons why reorganization is carried out

Financial recovery is necessary because the bank was unable to independently solve all its problems and fulfill its obligations to creditors. Most often we are talking about certain management errors. Sometimes - about direct violation of the law by certain employees that led to a similar situation.

If reorganization is not applied, the bank will have to go bankrupt, since it cannot fulfill its obligations. Bankruptcy has more serious consequences:

• the organization's property is sold;
• the company loses access to borrowed funds for some time;
• the organization’s rating is falling, third-party companies are cooperating with it less;
• creditors do not always receive the funds due to them, since the property sold in the process is not always enough;
• the bank's license may be taken away, which will entail the termination of its activities. This will negatively affect not only the owners, but also the citizens working in the company.

Therefore, reorganization seems more beneficial to almost all persons who are connected in one way or another with a financial institution.

Read: What to do if a bank’s license is revoked? Recommendations for investors

How are cupping treated?

In simple terms, resolution means the transfer of a financial institution to another owner or investor. It can be any large bank or even the Bank of Russia itself.

The procedure involving a commercial sanator is called “credit”. The new owner is given a grace period during which he rehabilitates the bank. The period for restoring financial stability is quite long. On average it reaches 10–15 years. Full restoration occurs at the final stage, when the bank begins to operate at full capacity in compliance with all legally established standards.

There is a second sanitization option. In the Russian Federation it has been used since 2017. This method involves direct investment by the Bank of Russia into the capital of a problem financial institution through the Banking Sector Consolidation Fund.

Attention! When using the second method, recovery occurs in record time (up to 1 year) with minimal costs.

Who chooses banks for reorganization and how does this happen?

All work on selecting banks for reorganization falls on the shoulders of the Central Bank. He, either independently or together with the DIA, reviews the statements of a particular credit institution, identifies errors and decides whether to work with the bank and try to bring it out of the crisis. But the final decision is still with the Central Bank, and only it can say who to pull out and who can be forgotten.

There are two official criteria by which the Central Bank makes a resolution decision:

• If the bank is important for the economy. This can be either the presence of large capital or simply participation in the development of a region or industry.
• If the bank's problems are caused not by internal, but by external factors. That is, if the bank has bad management that made the wrong decisions, the Central Bank will not undertake reorganization. But if the problems are caused by the crisis, then they will work with the credit institution.

Everything is clear with the first criterion. The conditional Sberbank or VTB will save with all their might. When I looked at the report of Rosselkhozbank in 2020, they gave a figure of 86 billion rubles in losses. And did this bother anyone? No, because the bank is sponsored by the state and implements half of its programs in the agricultural sector. And if a difficult situation arises with a credit institution, the reorganization will be carried out unofficially and the bank will be pulled out.

But the second criterion looks funny and here's why.

In the pre-crisis period, Bank Trust withdrew 15 billion rubles through offshore companies. The case involved a manager and three of his subordinates. Then the crisis, panic and people who want to get their money. As a result, depositors withdrew 3 billion rubles from the bank, even though they did not receive their interest. And because of this, the bank's fortunes deteriorated. All the problems and falsified reports were revealed. And if it weren’t for these 15 billion, the bank would not have suffered so much, and there would still be enough money to comply with regulations and stable operation. But the bank was still accepted for the reorganization procedure.

What will change for the bank depositor during the reorganization?

The reorganization does not in any way affect existing deposits and loans. For them, interest rates remain the same. Changes may only affect new clients. They may be serviced under modified terms. The same applies to new contracts concluded with existing clients.

In this case, coupon payments on previously issued bonds are made on time. The situation is different with subordinated bonds. These are securities with increased yield. Their owners are actually shareholders, i.e., owners of the bank. Therefore, reorganization entails the termination of payments on bonds of this type.

Signs of bank problems that require reorganization

Federal Law No. 127 lists 6 reasons that entail the introduction of temporary administration at a bank:

• Repeated delays by the bank on its loan obligations over the last six months.
• Violation of deadlines (by more than 3 days) for paying taxes and fees due to insufficient funds in the accounts.
• Failure to comply with the capital standards of a credit institution established by the Central Bank.
• Reduction of the bank's capital volumes over the year by more than 20% (in case of violation of the funds adequacy standard).
• Violation of the minimum volume of current liquidity (by 10% or more within a month).
• Decrease in the value of the bank's assets below the level of the authorized capital.

The law obliges bank owners, if any of the above reasons are discovered, to immediately contact the Central Bank with a request for reorganization. A financial recovery plan must be attached to the application. The Central Bank of the Russian Federation either takes this plan into account or rejects it, sometimes changing or supplementing it if we are talking about systemically important credit institutions.

The Bank of Russia itself can also initiate the reorganization procedure based on the results of scheduled or unscheduled inspections of the activities of a credit institution.

There are other situations. For example, in 2010, the decision to reorganize the Bank of Moscow by VTB structures was made after the resignation of the mayor of the capital, Yuri Luzhkov (the mayor's office owned more than 46% of the shares of BM), the initiation of criminal cases against the bank's management and an audit of the financial organization by the Accounts Chamber.

What are the consequences of reorganization for a business that has current accounts at a bank?

For companies that have current accounts in a bank being rehabilitated, the procedure for rehabilitation of a financial institution is more preferable than its liquidation. In this case, it is recommended to temporarily use the cash settlement services of another bank. Perhaps conditions will soon change for the better, since the financial institution is not interested in losing customers.

Attention! Unlike reorganization, revoking the license of a problematic financial institution carries higher risks. This is due to the fact that business deposits are not insured, and the policy for individual entrepreneurs has coverage of 1.4 million rubles.

Clean rehabilitation

When reading scientific literature on the topic of financial recovery of companies, you can often come across the concept of pure rehabilitation. Rehabilitation is considered clean if the company is able to cover losses based on internal reserve insurance funds.

The use of pure resolution not only significantly reduces the risk of bankruptcy, but also significantly reduces the need to attract capital from external resources. If decentralized financial support for reorganizing the company is not enough, they may decide to provide state support to the enterprise. If an enterprise's activities are unprofitable, but the state recognizes the company's products as socially necessary, it provides the enterprise with a subsidy or other type of financial support.

If the executive branch decides to provide financial support to a particular enterprise, it must proceed from the principle of selecting those production structures that are viable and that are able to use the assistance with the greatest possible return and guarantee an increase in the amount of production and sales of income-generating products. This decision can be made based on compliance with several criteria:

• Introduction of newer, economically and environmentally beneficial technologies.
• Export of products that can create competition, or its increase.
• Replacement of importing material, spare parts, raw materials, etc.
• Eliminating the problem of energy supply to the national economy.
• Preservation of research and development that is a priority for the country's economic system.
• Sales of company products to foreign and domestic markets.
• The presence of a high level of management in the company.

Centralized rehabilitation support can be provided through direct budget financing and indirect forms, creating favorable conditions.

Direct budget financing of company reorganizations can be carried out based on the principles of repayment (using budget loans) and non-repayment (subsidies, subsidies, full or partial purchase by the state of shares of a company that is on the verge of bankruptcy.

There is a proposal according to which it is necessary to create a special fund in the state budget to finance the rehabilitation and restructuring carried out for state-owned enterprises. But at the same time, most Western researchers have clearly stated that direct government funding not only stimulates the budget deficit, but also causes some negative effects at the macro and micro levels of the economic system. In addition, it is worth noting that many economically developed countries have already completely or almost completely abandoned this type of enterprise financing.

Where else can the sanitization procedure be applied?

The resolution procedure can be applied not only to banks. This measure is provided for enterprises of any type. It entails changes not so much in the material sphere as in the legal one.

A diversified enterprise is subject to a merger with another company with a similar focus. In other cases it is divided into segments. Often an enterprise is privatized or transformed into an OJSC.

Attention! Resolution is only used in cases where the company can be saved. If the company is hopeless, bankruptcy proceedings are applied to it. This process is controlled by the arbitration court.

Purposes of rehabilitation

The goals of rehabilitation are:

• improving the company's capital structure;
• maintaining the credit rating and share price through pre-trial resolution of the issue;
• sale of low-liquid assets;
• personnel optimization;
• repayment of overdue payments to the budget and loans;
• restoration of normal functioning of the company.

The initiation of a bankruptcy case in an arbitration court and the introduction of supervision often causes a fall in the stock price, hence, accordingly, a decrease in the authorized capital, which aggravates the insolvency. Rehabilitation carried out before the trial avoids a fall in the stock price. For socially significant organizations, it is also important to restore solvency through reorganization without suspending the main activities and transferring control over the legal entity to an insolvency practitioner.

What activities are carried out during reorganization?

To improve the bank's health, measures are taken that depend on the circumstances that led to the problems. If the company's insolvency is temporary, repayment of all obligations is carried out from the budget. This applies to state-owned enterprises.

In addition, the commercial bank servicing this company, after an audit, provides it with a targeted loan.

Assistance can be provided by another legal entity wishing to take part in the reorganization and undertake obligations to repay the debt.

It is also possible to issue new shares and bonds with a guarantee from the sanatorium.

If the state of the enterprise is in crisis, reorganization measures are applied to it, entailing a change in the status of the company:

1. Merger with another company that has a more stable financial position. The company being rehabilitated loses its status as an independent legal entity. A merger can be horizontal (enterprises belong to the same industry) or vertical (enterprises belong to different industries).
2. Absorption. This measure involves the acquisition of a troubled company by a more stable enterprise. In this case, the status of a legal entity can be maintained. The enterprise becomes a subsidiary of the sanatorium.
3. Separation. Suitable for multi-industry enterprises.
4. Transformation into JSC. This measure can be initiated by a group of people who want to take on the role of founders of the company. In this case, it is mandatory to ensure the minimum amount of authorized capital required by law.
5. Rental. This measure applies to state-owned enterprises. The lease is subject to the terms of the contract. In this case, the debts are paid by the collective of tenants.
6. Privatization. This measure is only possible in relation to state-owned enterprises.

Consequences of reorganization for investors and depositors

The main task of “recovering” a bank is to restore its solvency.

Its correct implementation prevents bankruptcy. Therefore, the procedure is beneficial for all types of investors, not only individuals, but also any legal entities.

Thanks to the bailout, investors retain all their funds. They also do not need to obtain insurance compensation according to the law, the amount of which may be less than the funds invested in the institution.

Important! Rehabilitation is a procedure that restores the organization's provision of all guarantees that are provided to depositors and allows them, if necessary, to freely withdraw their funds.

During the reorganization, all funds invested by investors are fully preserved.

After a successful procedure, the liquidity of the financial organization is restored, which allows you to withdraw previously invested funds on the same basis.

In this case, not only the body of the deposit is also taken into account, but also all interest accrued during the “recovery” period.

Worth knowing! When the reorganization does not bring the required result, the regulator initiates the bankruptcy of the bank, after which the liquidation procedure is carried out.

Advantages of rehabilitation

The positive aspects of reorganization are:

• Possibility of preserving all funds invested by clients in the bank;
• Preservation of employees of the financial organization their jobs;
• Regardless of the change in management, the previous financial obligations continue to be fulfilled.

What does reorganization give?

The activity of a bank is to accept deposits from some people and issue loans to others. Sometimes the risks are too great, and own funds are not enough to cover lending losses. There is a possibility of bankruptcy. In this case, investors risk losing their money. Then the Bank of Russia either revokes the license of the problematic financial institution or begins the reorganization procedure.

This measure contributes to:

• restoration of financial stability;
• rehabilitation of the bank;
• rapid restoration of solvency.

Consequences for bank clients

Photo: https://www.pexels.com/photo/businesswomen-businesswoman-interview-meeting-70292/
Bank bailouts are not scary for his clients. It is aimed at restoring the solvency of a banking organization, and therefore guarantees a return on invested funds. If it is carried out correctly, the bank will avoid bankruptcy, and its clients will avoid material losses.

For investors

Investors have the opportunity to return their funds. They will not need to issue an insurance claim, so they do not lose anything financially. Rehabilitation returns to the investor all the guarantees and obligations of the bank. Investors can withdraw their funds at any time.

The sooner the reorganization of a problem bank is carried out, the more guarantees depositors have for the return of funds. The depositor will be able to withdraw his funds when the resolution returns liquidity to the bank.

Rehabilitation is always carried out primarily in the interests of the investor. All deposits retain their insurance guarantees received from the DIA. The main goal of such measures is to maintain the bank’s ability to fulfill its obligations to clients.

For borrowers

Clients who regularly repay their loans should not be afraid of the consequences of reorganization. Nothing will change in the terms of their contracts. There will be no consequences for them from this.

But debtors are in for trouble. Typically, during a reorganization, banks, in order to improve their position, refuse those who make late payments, freeing their loan portfolio from problem loans. They usually sell such debts to collectors.

For individual entrepreneurs and legal entities

The term reorganization brings real benefits to legal entities and individual entrepreneurs. It is the accounts of these depositors that are not insured, as a result of which they suffer large losses in the event of bankruptcy of a banking institution. The bank can offer them more favorable terms of service, trying to retain customers during such a period.

Why don't all banks rehabilitate?

Sanitation is a complex procedure. Its implementation requires time, finances, and the involvement of highly qualified experts. Therefore, not all banks undergo rehabilitation. To do this, you must meet the following requirements:

1. Systemic significance of the problematic institution. If a bank is important for the financial market of an entire country or region, and its collapse could lead to a loss of confidence in banks as a whole on the part of customers, the likelihood of resolution is high. The chances increase when government funds or funds from large companies and foundations are placed in its accounts.
2. Compliance with legal requirements. Recovery is likely if the bank conducted honest activities in relation to the regulator and clients and acted as a financial intermediary between investors and borrowers.
3. Availability of economic justification. Before starting the procedure, the Bank of Russia assesses the upcoming costs. If the financial institution is not significant or cannot be rehabilitated, resolution is neither practical nor likely. In this case, bankruptcy proceedings begin, which is accompanied by revocation of the license.

Attention! Resolution is not only aimed at saving one specific financial institution. Its main direction is to maintain the stability of the entire banking system. Each case is considered individually. The regulator preliminarily assesses the possible consequences for clients and the entire market. If he believes that the reorganization does not have good grounds, revocation of the license is inevitable.

Types of rehabilitation

Reorganization can be carried out in two main ways - with a change in the legal status of the company and without a change in status.

The status of a company is determined by its legal form, size and availability of permits. In particular, a change of status is considered:

• transfer of LLC to joint stock company;
• obtaining a license for a new type of activity;
• increasing or decreasing the number of employees and profit margins to the limit.

For example, transfer to “small enterprise” status occurs when annual income increases to 800 million rubles (Government Decree No. 265).

No status change

Without changing the status, reorganization is carried out:

• through the provision of financial assistance;
• through diversification of production;
• through the sale of part of the assets through division.

Financial assistance is provided by the sanatorium as a loan at interest or in exchange for part of the assets (production capacity along with the team). This is called direct reorganization, that is, reorganization is carried out without reorganizing the debtor’s company.

Assets can be transferred to the sanator through a separation procedure, when a subsidiary legal entity, which includes debt claims and low-profit divisions, is separated from the debtor's company. As a result, the sanatorium receives existing production facilities, which can be repurposed or updated, subject to the repayment of creditor claims. The debtor's legal entity remains in its previous status.

With status change

There are two types of reorganization with a change in the status of an enterprise:

• transfer of assets to a new joint stock company;
• merger of the debtor with a financially stable company.

The transfer of assets to a new JSC with the subsequent sale of its shares on the stock exchange and thus increasing the authorized capital is carried out under the control of the sanatorium company, which buys out a controlling stake and places the rest on the stock exchange. The debtor's enterprise ceases to exist.

When the debtor joins a more stable enterprise, the status of the debtor is also lost. There are three options for this connection:

• vertical;
• horizontal;
• conglomerate.

Vertical merger assumes that the companies of the debtor and the sanator are diversified, and in fact only the authorized capitals are connected , or the companies are part of a more complex process. For example, a vertical acquisition includes the purchase of a bankrupt resource supplier by a large company that processes such resources.

With a horizontal merger, the company of the sanatorium has the same profile as the company of the debtor - this option is suitable for the sanatorium, which decided to expand production, immediately receiving ready-made facilities with a workforce.

Conglomerate acquisition is a complex combination of horizontal and vertical and aims to diversify production in order to increase its profitability.

Reasons for creating FCBS

After assuming the post of Chairman of the Central Bank of the Russian Federation in 2013, Elvira Nabiullina intensified the process of rehabilitation of the banking sector by closing credit institutions that were found to be involved in questionable transactions or were experiencing financial problems. Small banks began to lose their licenses. Their investors in 2014-2017. The Deposit Insurance Agency (DIA) paid compensation totaling over 1.7 trillion rubles. For larger banks, a financial rehabilitation mechanism was provided with the participation of the DIA or other credit institutions. However, their resources were not enough to rehabilitate banks that were in the top 20 in terms of assets.

In July 2020, Prime Minister Dmitry Medvedev gave instructions to create a so-called bad debt bank or sanatorium bank in Russia, which would support systemically important corporations.

Goals of the procedure

Sanitation is necessary for:

1. Covering current expenses and eliminating the causes that caused them.
2. Savings or restoration of solvency and liquidity of the company.
3. Reduce debt of all types.
4. Improving the structure of working capital.
5. Formation of resources that are necessary for industrial reorganization.

The procedure is aimed at:

1. Improving the company's organizational system and legal forms of business.
2. Improving the quality of management.
3. Elimination of unproductive production elements.
4. Improving interaction between company employees.

Pre-trial rehabilitation can be carried out:

1. While maintaining the existing legal status of the company.
2. With a change in the organizational and legal type and legal status class=”aligncenter” width=”700″ height=”509″[/img]

Which Russian banks are under reorganization?

Let us remember which of the banks subjected to the reorganization procedure were the largest and most prominent on the market.

1. August 2020. Otkritie Financial Group asked the Central Bank for reorganization. The group includes Trust Bank and the insurance company Rosgosstrakh. They were taken by Otkritie for rehabilitation at the expense of loans allocated by the regulator. The Central Bank became the owner of Otkritie.

2. September 2020. The reorganization of the BIN financial group began, which includes B&N Bank, MDM Bank and six unprofitable banks of the Rost group. B&N Bank recently sanitized them with the help of loans from the Central Bank. Now 100% of the authorized capital of B&N Bank belongs to the regulator. A decision was made to merge Otkritie and B&N Bank into one bank by the end of 2020.

3. December 2020: a temporary administration of the Banking Sector Consolidation Fund was introduced at Promsvyazbank, which is included in the list of systemically important credit institutions. In January 2018, it became known that the government intends to make Promsvyazbank a specialized structure for financing state defense orders, so as not to expose Sberbank, VTB, Gazprombank and other major players to sanctions. The bank has already been transferred to state ownership.

To recapitalize Promsvyazbank, according to Central Bank estimates, more than 200 billion rubles will be needed. The total amount of injections required for reorganization into the three listed banks alone could reach a trillion. Meanwhile, the bank’s loss for 2020 amounted to 405 billion rubles. The total loss of banks undergoing reorganization by the Central Bank in 2020 amounted to 1.6 trillion rubles

These large-scale events were preceded by a public scandal surrounding Alfa Capital analyst Sergei Gavrilov, who sent out warnings to his clients about accumulated problems in Otkritie, B&N Bank, Promsvyazbank and Moscow Credit Bank (MCB). The employee was then administratively punished, and his words were officially disowned. Although the number of license revocations in 2020 decreased compared to 2020, the reorganization of large players in the banking sector has never acquired such proportions.

In addition to the crisis, Otkritie, Binbank and Promvyazbank were led to reorganization by their own actions to aggressively take over weaker players. The calculation was for future economic growth, as a result of which assets bought “on the cheap” would increase in price. Opening, using a loan from the Central Bank, entered into capital in 2020 and began to carry out additional capitalization of the large retail bank Trust. Then, in the summer of 2020, it acquired the largest on the market, but unprofitable financial group Rosgosstrakh. The BIN Group sanitized six banks of the Rost group and MDM Bank. In 2015, the main shareholder of BIN, Mikhail Shishkhanov, acquired the Raiffeisen pension fund, which the Austrian founders decided to abandon. In February 2020, the regulator ordered their share in Vozrozhdeniye to be reduced to 10%. The main reason for the sale was the freezing of the funded part of the pension since 2014, due to which non-state pension funds lost a significant part of their financial flows. The owners of Prosvyazbank, the Ananyev brothers, acquired a controlling stake in Vozrozhdenie Bank. Now “Vozrozhdenie” is also under reorganization by the Central Bank. It was also decided to merge the banks Trust (Otkritie group) and Rost (BIN group), and turn Trust into a “bank of bad debts”. But before that they will need additional capitalization in the amount of about 1.1 trillion rubles.

Thus, the shareholders of Otkritie, B&N Bank and Promsvyazbank relied on the aggressive expansion of their market share. At the same time, they almost did not invest their own funds, but made purchases using a Central Bank loan at a preferential rate. However, they did not take into account all the consequences of the crisis. Instead of the expected growth, the banking market began to lose momentum. The “holes” in the balance sheets turned out to be much larger than the financial statements initially showed. Some of the loans to legal entities were issued to business structures affiliated with the owners, and the valuation of collateral turned out to be overestimated. Obviously, part of the blame lies with the Central Bank, which did not properly check the quality of assets.

Also under reorganization by the FCBS are:

• Asia-Pacific Bank, whose ex-owner Andrei Vdovin was arrested in absentia.
• Sovetsky Bank.
• AvtoVAZbank.

Rehabilitation options

As stated earlier, the Central Bank or any other large banking organization that can cover the costs of the institution being reorganized takes part in the reorganization procedure. Thus, we can conclude that there are 2 types of rehabilitation:

1. The owner of the bank being rehabilitated becomes the National Bank of the country, which injects funds into the bank’s capital, saving it from bankruptcy.
2. The owner of the bank becomes a large financial organization that is ready to personally bring the bank out of a critical situation by injecting funds issued by the Central Bank in the form of a loan on preferential terms.

It doesn’t matter who was involved in the reorganization process, after completion he will have to make a choice: keep the bank for himself and continue to develop it, or sell it to another owner.