Subordinated loan is a special form of lending. This loan is provided for a period of at least five years, and it cannot be repaid ahead of schedule without the approval of the Central Bank of the Russian Federation.
Features of a subordinated loan
For the Russian banking system, subordinated credit is a new phenomenon, although it has become widespread in Western practice. In addition to the strictly agreed terms and the impossibility of early repayment, the following can be noted among the features of the subordinated loan:
The debt on the loan is repaid only after the expiration of the term of the loan in one payment. This is both an advantage and a disadvantage of this loan: on the one hand, the borrower can be sure that during the entire lending period no one will demand anything from him (the loan cannot be claimed ahead of schedule), on the other hand, it is impossible to repay the loan ahead of schedule and save on percent.
Such a loan is available only to legal entities, in Russian practice it is issued only to banks, they serve to increase capital and act as an anti-crisis measure and help banks avoid bankruptcy proceedings.
Subordinated loans were actively issued to banks during the crisis in 2008-2009. Thus, VEB issued loans to 17 banks in the amount of 404 billion rubles, the largest loans were received by VTB (200 billion rubles) and Gazprombank (90 billion rubles).
A bank that has received a subordinated loan can include loan funds in the amount of 100% on the account of additional capital, if the agreement with the Central Bank was concluded for a period longer than 5 years. If - for less than five years, then borrowed funds can only be used with restrictions.
Subordinated loan terms
Under the terms of the subordinated loan agreement, the amount of interest and principal, the borrower cannot repay earlier without the permission of the Central Bank of the Russian Federation. Only he can amend the agreement and allow early repayment and revision of the amount of interest on the loan. The contract should not contain institutions that can in any way affect the termination of the contract. The Central Bank checks whether the bank has claims against the person who provided the subordinated loan.
If the borrower goes bankrupt, then the lender's claims on the subordinated loan will be fulfilled last, only after the claims of all creditors are satisfied by 100%.
The interest rate at which the Central Bank's money is issued cannot exceed the current refinancing rate, it is fixed and is not subject to revision. When applying for such a loan, no collateral is required for the loan. The contract cannot include clauses on forfeit.
