In its meeting today, the
Board of Eesti Pank decided to initiate bankruptcy proceedings
against Eesti Maapank. The Board rejected the application of
Eesti Maapank shareholders' extraordinary general meeting to
terminate its activities by voluntary liquidation.
In the opinion of Eesti
Pank, initiating bankruptcy proceedings against Eesti Maapank is
the best possible solution at present, since it makes the process
transparent and prevents illegal transactions. Small depositors
will presumably be protected by the Government implementing
principles of the Deposit Insurance Fund Act.
The Board of Eesti Pank,
when taking the decision to initiate bankruptcy proceedings took
into account the fact that the financial situation of Eesti
Maapank made it impossible to meet the claims of creditors to the
full extent which is a prerequisite in case of voluntary
liquidation.
In the course of
bankruptcy proceedings it is possible to determine the actual
size of Eesti Maapank assets and liabilities, and to recover
certain assets of the bank by initiating special procedures under
the Bankruptcy Act. Also, calculation of interests and fees for
overdue payments will be terminated and the trustee in bankruptcy
can provide the public with precise information on the situation.
By now it has become clear
that no satisfactory conclusion has been reached in the attempts
to find a solution for fully meeting the claims of private
depositors by incorporating the efforts of the Government and
commercial banks, neither have the necessary agreements been
signed. This is due to the fact that it is impossible to
determine the size of the assets of Eesti Maapank with necessary
accuracy since these are linked with liabilities the size of
which it is difficult to define.
In order to protect the
interests of Eesti Maapank depositors, Eesti Pank has once again
proposed the Government to implement the principles stipulated in
the Deposit Insurance Fund Act when the bankruptcy proceedings
are initiated. According to the Act, deposits are subject to
compensation up to EEK 20000, but not more than 90% of the total
deposited amount. According to preliminary calculations EEK 200
million will be needed for that.
Eesti Pank is of the
opinion that the problems caused by the difficulties of Eesti
Maapank to the financial situation of the central government,
local governments and off-budgetary funds need to be taken into
consideration when planning future fiscal policy. In order to
maintain trust in the economic policy of Estonia this means
temporary cuts in the planned costs of the public sector and
increases in revenues.
Eesti Pank does not
support the plans to draw funds from financial markets in order
to solve the problems of Eesti Maapank. Using the funds of the
Stabilization Reserve Fund or deferring the scheduled payments
into the Fund is advisable only as a means to overcome temporary
liquidity problems until the introduction of the above stated
changes. Clear obligations to restore these assets rapidly should
be a part of the package. In any case, any measures planned
should not discredit the conservative fiscal policy that is one
of the pillars of the Estonian economic policy. Central
government may also support other government budget financial
units and private persons by giving up its claims on Eesti
Maapank.
According to the Credit
Institutions Act, the initiation of bankruptcy proceedings means
that the license of Eesti Maapank is withdrawn from Monday, 29
June 1998 and the bank is subject to liquidation through
bankruptcy proceedings. The Board of Eesti Pank has made its
decision today proceeding from Article 9 Clause 3 of the Law of
the Central Bank and Article 77 Par. 1 and 4, Article 79, Article
80 Par. 1 Clause 3 and Article 81 Par. 1 and 2 of the Credit
Institutions Act. The decision on the initiation of bankruptcy
proceedings, the necessary data, documents and explanations will
be submitted by Eesti Pank to Tallinn City Court on Monday, 29
June 1998 together with a proposal to seize Maapank's assets
and name a trustee in bankruptcy.
Due to the withdrawal of
the license and initiation of bankruptcy proceedings against
Eesti Maapank, the activities of the bank as a credit institution
must cease. The execution of any transactions listed in Article 5
of Credit Institutions Act, is forbidden. After the publication
of the bankruptcy notice, any persons having assets of Eesti
Maapank at their disposal are forbidden to carry out any
transactions with them.
Eesti Pank has established
that, when various necessary corrections pointed out by the
supervisers will be made and provisions taken into consideration
in compiling the balance sheet of Eesti Maapank, the bank will
not able to meet the prudential ratios. The own funds of Eesti
Maapank is less than the required ECU 5 million established by
Article 37 Par 5 of the Credit Institutions Act. Eesti Maapank
does not meet the capital adequacy ratio, nor the established
reserve requirement.
It can be concluded from
the above and other information concerning the financial
situation of Eesti Maapank that the bank has incurred permanent
difficulties in meeting the obligations towards its creditors and
the bank lacks the necessary means and reserves to fulfill its
obligations. Thus, the bank is permanently insolvent.
