Do I have to pay off the mortgage if the bank goes bankrupt or has its license revoked?

If I put money on a deposit and the bank’s license is revoked, then it is approximately clear what to expect. So, if the deposit is less than 1.4 million rubles, then the deposit insurance agency will return the money in full. If theamount is greater, then only the insured part will return – 1.4 million rubles.

And what will happen to the mortgage if the bank, for example, goes bankrupt? Who will have to pay monthly fees? Or will I be free from obligations? How will this affect the terms of the contract?

If a bank fails, customers still have to repay loans. I will tell you in more detail how and for what reasons a bank can go bankrupt, what happens in this case with mortgage loans that it issued to people, and what borrowers should do.

Reasons why a bank may stop working

A bank is a credit organization that can go bankrupt or be liquidated only by decision of the supervisory authority – the Central Bank, or the Bank of Russia.

Art. 189.61 of the Law “On Insolvency (Bankruptcy)”

Liquidation can be voluntary or forced. The bank has the right to decide on liquidation itself, but in any case it must be registered by the Central Bank. This does not always entail a complete cessation of activities – the bank may join another credit institution, become part of it.

Bankruptcy leads to forced liquidation. This happens when the bank does not have enough own assets to pay off all liabilities. There are no fundamental differences for borrowers. In any case, the loan must be repaid – only the details of the lender to whom the money needs to be transferred will change.What to do? 14.02.19

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How many credit institutions are under liquidation as of March 1, 2022

Reason for liquidationNumber of credit organizations
Bankruptcy333
Forced Liquidationthirty
Voluntary liquidationeight
Total number of liquidated banks371

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I’ll tell you more about each reason.

The bank is reorganized and joins another credit institution. In this case, the bank will warn customers in advance. Either borrowers will repay loans using new details, or nothing will change for them. For example, in 2021, Vostochny Bank filed a petition with the Central Bank of the Russian Federation to join Sovcombank.

The bank is liquidated voluntarily. This happens if the board of directors decides to close the bank, for example, due to high competition.

Art. 23 of the Law “On Banks and Banking Activity”

The Board of Directors submits an application for termination of activities to the Central Bank. The Central Bank checks the financial statements and sees if the bank’s own capital is sufficient to cover current liabilities.

If the Bank of Russia reveals violations, for example, under the law on combating money laundering , it may refuse voluntary liquidation and revoke the license itself.

If there are no violations, the Central Bank will register the closure of the bank. But before that, the bank must pay off its obligations – to pay off creditors and depositors. To do this, among other things, he will cede claims on loans issued to other banks or a bank for a fee. Respectively,when a bank is liquidated, only the details for paying a mortgage change for borrowers./guide/cessiya/What is a cession

The Central Bank revokes the license. If the Central Bank reveals violations – for example, a bank issued loans without forming reserves or falsified financial statements to hide losses – it revokes the bank’s license. After that, the Central Bank submits an application to the arbitration court for the liquidation of the bank and appoints a temporary administration that manages the bank until the court decides.

Art. 20 of the Law “On Banks and Banking Activity”

After the bank’s license was revoked, any interested persons can apply to the court to declare it bankrupt. This can be done by employees, creditors or tax authorities.

Why a bank may go bankrupt or lose its license

The Bank of Russia strictly monitors the work of all banks in the country. For example, if a bank submitted financial statements 15 days late, then this gives the regulator the right to revoke the license.

A complete list of reasons why the Central Bank can revoke a license from a bank is specified in the law, and the most common are:

  • the bank violated the law on combating money laundering;
  • the bank hid its real financial position or created artificial indicators, for example, overestimated the equity capital adequacy ratio;
  • the bank violated banking laws.

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How can a borrower find out that a bank’s license has been revoked?

The sooner the client finds out that the bank has lost its license, the sooner it will find out what details to pay for. This will save the borrower from delays and litigation.

Information about the revocation of the license appears on  the same day. Here’s where to find it.

On the website of the Bank of Russia. For example, on February 11, 2022, the Central Bank revoked the license from the Conservative Commercial Bank. On  the same day, the information was published on the website of the Central Bank.

In the issue of the Bulletin of the Bank of Russia,  a special weekly publication for reporting on the revocation of licenses from banks. The message is included in the release within 7 working days after the Central Bank revokes the license.

Part 3 Art. 20 , Art. 23.2 of the Law “On Banks and Banking Activity”

The bank’s website will have a message stating that its license has been revoked, and instructions for customers. Or the client will be automatically redirected to the site of the deposit insurance agency – DIA.

If the bank’s website does not open, and the mobile application does not work, then the client can write a request to the online reception of theCentral Bank. The operator will respond within a few minutes and suggest a plan for further action.

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