Buying a foreign bank

Buying a bank is a complex and multifaceted process, and buying a foreign legal entity with a banking license is an even more complex process that requires deep analysis and careful preparation before concluding such a deal.

In this article, from our experience, we will look at the main stages and legal aspects that should be considered when acquiring a bank abroad.

Determination of the objectives of the acquisition of the bank

The first and most important step in the process of buying a foreign bank is a clear definition of goals.

The goals can be different: expanding business internationally, gaining access to new markets, increasing profitability through more effective financial instruments, or increasing competitiveness.

The criteria for choosing the bank itself depends on the clarity of the defined goals, what functions it can cover, what financial instruments it can have, and so on.

Choice of bank jurisdiction

Once we understand exactly which bank we need, we start looking at available options in a particular jurisdiction.

The choice of the jurisdiction in which the bank is located is also important. It is necessary to take into account the country’s legal system, its stability, level of economic development, tax burden, and regulatory requirements.

For example, some countries may offer a favorable environment for doing banking, while others may have stricter regulations and high taxes.

Determination of the budget for the purchase and maintenance of the bank

Calculation of the budget is an important stage because the financial burden will consist not only of the value of assets, it will also be affected by the size of the bank’s liabilities.

In addition, it is necessary to take into account the costs of legal support, financial audit, taxes, and other costs.

It is also important not to forget about the future costs of maintaining the bank: operational costs, employee wages, and costs of compliance with regulatory requirements.

Attracting investors. Their business reputation

If it is planned to attract investors to buy a bank, it is necessary to carefully check their business reputation and financial stability. Investors must have a positive business image and relevant experience in the financial field.

The business reputation of investors affects the reliability of the deal, and also increases the chances of approval of such investors by the local regulator, without which it is practically impossible to change the owners of the bank.

Bank verification, including financial

A financial audit of the bank before the purchase is a mandatory stage. It includes analysis of financial statements, verification of assets and liabilities, assessment of credit portfolio and other important aspects.

The purpose of the audit is to identify possible risks and confirm the financial stability of the bank, as well as to correctly calculate the value of such a bank, because it consists of many aspects and criteria that must be clearly checked before the start of the transaction.

Verification of bank assets

Valuation of the bank’s assets helps to understand the real value and liquidity of the latter. Assets can include real estate, investments, loans and other financial instruments.

However, from the experience of the specialists of the Law Company “Prikhodko and Partners”, there are cases when not all declared assets can be used or realized, which in turn can greatly affect the value of this legal entity.

Thus, it is important to ensure that assets are not burdened with liabilities and have high liquidity.

Inspection of credit portfolios

A bank’s loan portfolio is a key indicator of its financial condition, and accordingly, it is one of the most important indicators for a correct assessment of the value of such a bank.

It is necessary to carefully assess the quality of such loans, the structure of loan portfolios and the presence of problem loans, and all this must be done taking into account the specifics of one or another jurisdiction. This will avoid potential losses in the future.

Verification of bank owners

Also, it is important to check the owners of the bank, their business reputation, legal status and history of their activity. The owners must be transparent, reliable and have a good reputation in the business environment.

This will help to avoid further unnecessary problems, including with the regulator for the acquired bank.

Conclusions

Thus, as we can see, buying a foreign bank requires a comprehensive approach and careful preparation from many angles.

The involvement of professional lawyers, financial analysts, and other experts will help minimize risks and ensure the successful completion of the transaction, and thanks to the experience of the Prikhodko and Partners Law Firm, we will be able to find the bank that will fully meet your needs and provide full support for its acquisition for further operation