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The bulk (62.4% of the total number) of petitions, applications and complaints were considered by courts in the phase of a bankruptcy proceeding. In the phase of supervision, 33.4% of the petitions were considered. The number of petitions considered during external management procedures nearly tripled, increasing from 2,158 to 5,749.

Here and throughout the text bankruptcy statistics are taken from Analiticheskaia zapiska k statisticheskomu otchetu o rabote arbitrazhnykh sudov Rossiiskoi Federatsii v 2010 [Analytical Note to the Statistical Report on the Operation of the Arbitration Courts of the Russian Federation in 2010], pp.1619.

Section Institutional Issues year 2011 against 641 over the same period of 2010). The period of 20022008 had been characterized by a 5-fold drop in the number of external management procedures.

The dynamics of the number of external management procedures, financial recoveries and amicable agreements in 2002 and the first half-year 2011 is shown in Fig. 14.

Source: Statement on the consideration, by the arbitration courts of subjects of the Russian Federation, of insolvency (bankruptcy) cases in 20062010 and the first half-year 2011.

Fig. 14. The Dynamics of the Number of External Management Procedures, Financial Recoveries and Amicable Agreements over the Period of 2002 First Half-year By all indications, the year 2011 saw a historic high of the number of concluded amicable agreements for the entire period of 20022011, which amounted to approximately 300. That year would have also seen a peak in the number of cases when financial recovery procedures were applied. In the first half-year 2011, 76 such cases were already registered, which is by 13.4% higher than the previous historic high of 67 cases achieved in the same period of 2010.

The ongoing (for two years in a row) growth in the number of concluded amicable agreements and actually introduced financial recovery and external management procedures was triggered, for the most part, by the tax innovations introduced in 2010; by the increased opportunities for applying installment plans and delays in redeeming the accumulated arrears of mandatory payments, and for writing off uncollectable payables; as well as by the innovations designed to prevent bankruptcies of financial institutions (including insurance organizations) and to regulate the special bankruptcy procedures established for independent (non-state) pension funds, professional participants of the securities market, and asset managers of investment funds and mutual investment funds.

6.4.2. Bankruptcy Legislation in 2009The global economic crisis acted as an external stimulus for the implementation of some long-due alterations and the abandonment of the formerly inertia-based policy of the Russian government in the field of bankruptcy. Another reasons for an upsurge in the lawmaking ac RUSSIAN ECONOMY IN trends and outlooks tivity in that direction were the mounting payables owed by some of Russias biggest banks, loans issued to some big companies against their assets and the deterioration of the financial indices of many of those companies, and the anticipated growth in the number of bankruptcies of enterprises in 20092010.

In order to correctly estimate the latest innovations introduced in the bankruptcy field with regard to certain specific sectors of the economy, it is important to understand the status of and the situation faced by the relevant objects of regulation.

According to a study undertaken by the All-Russian Public Opinion Research Center (VTsIOM) and the Deposit Insurance Agency, in 2010, 40% of Russians, or about 40 m persons, had a deposit or account with one or other bank. For more than 57% of citizens, the most important criterion when selecting a bank was whether or not it was state-owned1. In 2009 and 2010, the number of banks was falling due to the imposition, by the RF Central Bank, of more rigorous standards for credit institutions. As a result, in 2009, 44 banks had their licenses recalled, and in 2010, 28 more credit institutions were liquidated2. More than 50% of the banking system is directly or indirectly controlled by the State. Thus, on the one hand, the State has clearly embarked on a process of creating a fully-fledged banking system, while on the other hand, it is taking measures designed to protect depositors interests.

In the last few years, the number of insurance organizations was decreasing by approximately 10 to 12% per year (as of the end of 2010, Russia had 618 insurance organizations registered in the Unified State Register of Insurance Entities; as of the end of 2009, their number was 702; and as of the end of 2008, it was 779)3. The introduction, in 2010, of more stringent equity capital requirements for insurance organizations, and the intensification of competition will be conducive to consolidation of the insurance market. According to some forecasts, between 200 and 250 insurance companies will be liquidated. Over the next five years, the share of Russias top twenty companies in total premium volume will increase from 69 to 80-85%, while that of the top ten companies from 55 to 65-70%4. At the same time, the compulsory motor-vehicle liability insurance OSAGO and the voluntary motor-vehicle insurance KASKO still represent the largest segments of the insurance market.

Russias non-state pension funds (hereinafter NSPF) have rather successfully survived the acute phase of the crisis. Their 2010 results had more than compensated for their losses in 2008. However, according to the Expert RA rating agency, the gap between the yield on the placement of pension reserves and inflation, accumulated over the past 5 years, remains no less than 10 to 15 p.p. This means that the issue of assets depreciation in real terms remains high on the agenda. The resolution of that issue can be brought about through upgrading the pension funds investment policy5.

Ye. Kukol. Stavki katiatsia vniz. [The Rates are Tumbling Down] // Rossiskaia Gazeta Stolichnyi Vypusk [The Russian Gazette Moscow Issue]. No 5166, 23 April 2010.

On the liquidation of credit institutions (as of 1 January 2011) www.cbr.ru Igroki strakhovogo rynka i ikh kapitaly. [Players of the Insurance Market and Their Finances] www.allinsurance.ru, 14 February 2011.

The Marillion companys forecast of the insurance markets development. www.allinsurance.ru, 20 December 2010.

In Q4 2010, the NSPFs assets increased by a staggering $ 30-35bn. The key factor of that surge in assets was the considerable rise in the stock market (thus, in the course of the afore-said period the MICEX Index grew by 18%). According to the Expert RA rating agency, the volume of pension reserves and pension savings rose to Rb 790-800bn. By the end of 2011, the NSPFs aggregate assets are likely to rise to Rb 1.5-1.2 trillion, dependSection Institutional Issues In 2009, the NSPFs managed to occupy the central niche in the trust management market, where they now accounted for up to 40% of operations carried out by asset management companies (AMC). It should be said that the market did not suffer even a single major bankruptcy, while the State totally refrained from giving any assistance to the system. Nevertheless, the NSPFs still have to deal with such issues as the wide-spread dishonesty of their agents, and the necessity to increase peoples trust in the system, to create compensatory mechanisms, to establish a single concept of market development, etc.In the next three years a stable growth and consolidation of the market can be expected:

69% of participants in the opinion poll conducted by Expert RA Rating Agency are anticipating that, towards the end of 2012, the volume of the NSPF market will exceed Rb 1.5 trillion (which means that it will have more than doubled over 3 years). At the same time, 72% of the respondents believe that more than 90 funds will remain on the market (and 39% think that their number will be no more than 70). However, this does not mean that the potential for NSPF growth will be exhausted 68% of participants in the survey expect that no more than 7m insured persons are going to transfer their pension savings into these funds2.

Over the past decade, the securities market has been experiencing a rapid growth of quotations coupled with an increasing interest in that market displayed by private investors. As of 1 September 2006, 1,402 organizations were operating as professional securities market participants under broker licenses; 1,410 organizations held licenses of professional securities market participants authorized to operate as dealers; 1,048 organizations held licenses of professional securities market participants for the conduct of trust management; 9 organizations held licenses for the conduct of clearing activities on the securities market; 748 organizations operated under professional securities market participant licenses for depositary operations;

77 organizations operated under licenses to run registers; 5 organizations held licenses for organizing trade in the in the securities market; and 6 organizations held licenses to operate a stock exchange3.

The number of companies professional participants of the securities market and the collective investments market in recent years has been displaying a gradual downward trend, which is going to continue. First of all, the number of professional securities market participants will be declining in response to the coming in force, from 1 July 2010, of alterations introduced in the specifications of sufficiency of own funds for professional participants in the securities market and the asset managers of mutual investment funds and independent pension funds4. The tougher requirements established by the regulator will result in either ing on the market situation. See Itogi 2010 na rynke NPF: v poikakh effektivnosti [2010 NSPF market results: a quest for efficiency] - www.raexpert.ru Krizis proshol riski ostalis. [The Crisis Is Over The Risks Are Still There.] An Overview by the Expert RA Rating Agency of the NSPF Market Based on the Results of the Year 2009. see www.raexpert.ru Solidarnost v detaliakh i voprosy po sushchestvu. Resultaty oprosa reguliatorov finansovogo rynka, topmenedzherov negosudarstvennynkh pensionnykh fondov i upravliaiushchikh upravliaiushchukh kompanii na konferentsii Budushchee pensionnogo marketa [Solidarity in Details and Some Essential Issues. Results of Surveys of Financial Market Regulators, Top Managers of Non-State Pension Funds and CEOs of Asset Managers at the Conference The Future of Russias Pension Market]. See www.raexpert.ru Sovershenstvovanie nadzora na finansovom rynke Rossii [Improving Russias financial market supervision] see www.raexpert.ru Thus, from 1 July 2010 onwards, the professional participants in the securities market engaged in dealer and (or) broker operations, as well as securities management, must possess a charter capital in the amount of no less than Rb 35m, and from 1 July 2011 onwards Rb 50m.

RUSSIAN ECONOMY IN trends and outlooks these companies being ousted from the market and then liquidated, or in their merger with some other structures.

The years 20032007 saw a robust development of mutual investment funds (hereinafter MIF) against the backdrop of the then favorable macroeconomic situation. Thus, the volume of aggregate net assets over that period increased more than 35 times (Rb 11.7bn as of 1 January 2003, and up to Rb 420.5bn as of 1 January 2007). According to the National League of Management Companies, as of 29 August 2008 the number of functioning MIFs was 1,058; the number of MIFs being created was 19; the number of asset managers (AM) was 287; net asset value (NAV) of all Russian MIFs amounted to approximately Rb 507bn, of which that of close-end funds amounted to Rb 365bn; that of open-end funds amounted to Rb 104bn; and that of interval unit investment funds amounted to Rb 38bn. As for the situation in 20082010, we may describe it as follows:

- a stable decline in the net asset value of MIFs and asset managers from May 2008 through December 2009 by nearly 44.4% (from Rb 552.81bn to Rb 307.4bn respectively);

- growth in the number of MIFs, from 1 January 2009 through 1 January 2010, by more than 19% (from 1,050 to 1,252 respectively);

- considerable growth in the number of asset managers, from 1 January 2009 through 1 January 2010, by more than 4.8 times (from 68 to 328).

According to a survey of 2,000 developers carried out by the Association of Russian Builders in 2009, two-thirds of Russias building companies were either on the verge of bankruptcy or had already gone bankrupt. This circumstance was fraught with serious danger not only for one of Russias most important industries, but also for the social and economic right of investors (individuals and organizations alike).

Thus, the States innovations in the field of prevention and introduction of a special bankruptcy procedure clearly represent, on the one hand, instruments for regulating consolidation and liquidation processes in the corresponding markets, and a means for preventing the negative social consequences of these developments.

The further course of bankruptcy legislation development, centered on the idea of creating favorable conditions for satisfaction of the creditors interests and for improvement of their rights protection, was determined by two factors. The first factor was the States decision to provide assistance to the banking sector, and to take measures designed to preserve the stability of that sector, including by creating conditions for keeping banks bad loan levels low. The second factor was large-scale irregularities in repayments under loan agreements. The idea itself can be deemed to be both an anti-crisis decision (because 40% of Russian citizens have bank deposits) and a decision that satisfies the interests of the currently strong financial The companies operated under a license to provide depositary services unrelated to security settlements effectuated through organizers of trading in the securities market or through entities authorized to execute depositary operations on behalf of investment funds (MIFs and NSPFs) Rb 60m, and from 1 July 2011 onwards Rb 80m.

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