Alta Bank's insolvency - main legal consequences
The decision of the National Bank of Serbia to revoke the Alta Bank' s license, rendered on 30 October 2026, and the imminent decision on the opening of insolvency proceedings over that bank, have multiple legal consequences on the bank's dealings.
Payment systems: Netting and transfer orders accepted in the system before the decision on the revocation of the bank's license was rendered remain valid and with legal effect vis-à-vis third parties. Transfer orders accepted after the decision on the license revocation and executed during the same business day are valid and effective only if the system operator neither knew nor could have known of the bank's insolvency. Netting may not be challenged, nor may re-netting be carried out, on the basis that transactions or contracts concluded before the onset of insolvency are null and void. The right of other participants, the system operator and the National Bank of Serbia to satisfy their claims from collateral provided in connection with participation in the system is not affected by the bank's insolvency and is exercised in accordance with the Financial Collateral Act.
Close-out netting under eligible financial contracts: A bank's financial contracts concluded with eligible financial counterparties within the meaning of the Financial Collateral Act, under the auspices of a master agreement (e.g. contracts on financial derivatives concluded under the ISDA Master Agreement), enjoy special insolvency-related protections, such as the possibility for the counterparty to close-out and net the exposures.
Fixed contracts: After the opening of insolvency proceedings, a creditor under a fixed contract (i.e. a contract where the delivery date is essential) cannot request specific performance from the insolvent. It may instead register its claim stemming from the presumed non-performance, in the amount of the difference between the market price at the place of delivery on the date of the opening of insolvency proceedings and the contract price. The foregoing does not apply to EFCs.
Executory contracts: With the exception of fixed contracts and eligible financial contracts referred to above, the opening of insolvency proceedings does not have of itself an impact on the continuing validity and binding effect of contracts under which, as of the moment of the opening of insolvency proceedings, neither party has fully performed its contractual obligations. Accordingly, such executory contracts survive the opening of insolvency proceedings over the bank. The Deposit Insurance Agency acting as insolvency administrator has the right to elect whether the bank will perform its obligations under the contract and request performance from the counterparty, or it will repudiate the contract. If the insolvency administrator fails to perform an executory contract which it previously elected to perform, the counterparty's claim arising from such non-performance is treated as an obligation of the insolvency estate, payable ahead of insolvency creditors' claims. If the insolvency administrator elects to not perform the contract, the counterparty is an insolvency creditor with respect to its claim resulting from the repudiation of the contract.
Claims against the bank: Claims against the bank acquired before the opening of insolvency proceedings which would become due and payable in the future become prematurely due and payable on the date of the opening of insolvency proceedings.
If claim is in foreign currency, it is converted into dinars at the official middle exchange rate of the National Bank of Serbia on the date of the opening of insolvency proceedings.
Creditors must register their claims in insolvency proceedings within the deadline set in the decision on the opening of insolvency proceedings, which cannot be shorter than 30 days or longer than 90 days from the date of publication of the notice on the initiation of bankruptcy proceedings in the Official Gazette.
A creditor who at the same time owes money to the bank is not permitted to offset its claim against its debt to the bank unless both the claim and the debt to the insolvent had become due and payable prior to the decision on the licence revocation (assuming the licence revocation, being the insolvency trigger under the special law on insolvency of banks, is treated as the equivalent of insolvency petition under the general Insolvency Act). Even then, certain restrictions apply. To preserve set-off in those case where set-off is permitted, the creditor must register its claim, together with a set-off statement, within the claim registration deadline, failing which the right of set-off is lost.
Money deposited by individuals, entrepreneurs and micro, small and medium-sized companies is insured up to EUR 50,000 (or its dinar equivalent) per depositor. The insured amounts are paid out by the Deposit Insurance Agency outside the distribution of the bankruptcy estate, within seven working days from the initiation of bankruptcy proceedings, and depositors do not need to register them. Any part of a deposit exceeding the insured amount must be registered as a claim in the bankruptcy proceedings. Claims of insured depositors for the remainder of their deposits in excess of the insured amount are ranked first. Deposit claims of other depositors (e.g. large companies), except banks and other financial institutions, are ranked fourth, behind certain public revenue claims and claims of the National Bank of Serbia. Deposits made by banks and other financial institutions are ranked fifth, together with the claims of other unsecured creditors. Claims arising from the bank's subordinated liabilities are ranked sixth, followed by claims of creditors who are also shareholders of the bank, while shareholders' claims based on share capital may be settled only from any surplus remaining after all creditors are paid in full.
Secured creditors: Upon the opening of insolvency proceedings, secured creditors (creditors having security on debtor's asset for their claims against that debtor) and pledge creditors (creditors having security on debtor's asset for their claims against third party) can enforce security only via insolvency administrator, who is the only one entitled to sell the collateral unless the secured creditor obtains special leave from the court to sell the collateral (such leave can be granted under specific conditions). The secured creditor can bid with its claim for the collateral, in which case it must pay in cash the costs of sale and any part of the purchase price not covered by its secured claim. It also has a right of first refusal when the collateral is sold to a third party by private sale.
The text is of a generic nature, it does not refer to the specific dealings of Alta Bank and does not constitute legal advice.
Photo by Viktoriia Kondratiuk on Unsplash