Corporate liquidation is a complex matter. Yet, it allows insolvent companies to exit the market orderly. Losses are taken by the creditors and shareholders of the company. Financial institution failure is a more delicate situation since it disrupts confidence in the financial system, may require tax payer input and thus impacts society at large. Bank resolution regimes are therefore introduced to protect account holders, creditors and shareholders, and simultaneously achieve the regulatory objectives that contribute to a stable and efficient economy. Competing interests of regulators, creditors and shareholders must be balanced in order to mitigate the risk of financial institution failure. In this complex environment, Legal Floris LLC provides bank customers with a consistent, reliable and predictable strategy to reclaim their money from failed banks.
Legal Floris LLC is a US based consultancy firm founded by Floris Alexander to assist international creditors impacted by bank failure and investment fraud to minimize their financial risk and maximize repayment via a proven, time-tested and global recovery plan. Over the years, Floris and his team helped hundreds of bank customers and investors to successfully reclaim their outstanding account balance from financial institutions in for example Cyprus, the Bahamas, Latvia, Puerto Rico, Malta, Belize and Austria.
Comprehensive Recovery Strategies in Bank Liquidation
Prior to a definitive failure, financial regulators may implement different measures to prevent a run on the capital of the bank and protect financial stability. These measures include statutory administration, deposit insurance, withdrawal suspension, blanket guarantees and liquidity provision via a lender of last resort. Since risk exposure is difficult to determine in the early days of regulatory intervention, creditors should intensify their recovery efforts and focus on distinct strategies for reimbursement. Floris and his team identify the opportunities when and where they arise and provide customers with an efficient and effective recovery plan. This mostly includes the following steps:
Statutory Administration: early intervention at distressed financial institutions often leads to a temporary cooling down period where insolvency matters can be resolved and an outflow of capital avoided. Statutory administration is alleged to provide the best of both worlds: much needed time to evaluate the available resolution with limited damage for creditors, shareholders and other stakeholders. During the stage of statutory administration, restricted access to payment facilities or a temporary moratorium on transactions may be imposed.
Deposit Insurance: a financial crisis often starts unexpected and without notice. Public confidence then quickly diminishes and pressured by fear of losing their wealth, creditors start to withdraw their funds from the bank. In particular in the current era, where internet banking and mobile transactions are commonly used, information asymmetry leads to an uneven playing field. Early adopters, with first-hand knowledge and the best information, recover all their funds at the expense of other creditors. To manage a run on the bank and simultaneously avoid disruption of the monetary system and a reduction in production due to liquidity shortages, bank deposit insurance is implemented. Depending on the jurisdiction and applicable legal framework, a local deposit guarantee scheme protects the account balance of (eligible) creditors up to a predefined and adequate coverage level. Timely disbursement to eligible account holders maintains public confidence in the financial system, provides much needed liquidity to the creditors of a financial institution in distress and allows the regulator to implement the appropriate resolution measure.
Bank Liquidation: when the outcome of a resolution assessment disqualifies the distinct options to restart operations, the bank must be liquidated and dissolved. Bank liquidation is a formal closure of the legal entity by a liquidator who collects the corporate assets for ultimate distribution to eligible creditors. The liquidator is appointed and approved by the court and follows the statutory schemes that outline the creditor or insolvency hierarchy to reimburse creditors. A separation is made between prioritized (secured) claims and subordinated (unsecured) claims. Regular account balances are protected up to the limit of deposit insurance. The surplus on accounts above the deposit protection limit is by default considered unsecured. It follows that prioritized and secured claims are first paid in full. If there is still value left, a common fund is then formed for equal distribution to all the subordinated and unsecured claims. The latter, the unsecured claims, belong to the account holders, bond holders and investors in the bank.
Individual and Collective Action: legal action by creditors is limited during the stage of statutory administration. Bank liquidation is often seen as the end of procedures, triggered by liquidity and solvency shortage. Due to the international character of banking and finance, creditors of failed financial institutions are exposed to lengthy procedures with disappointing results. However, several alternatives may be available for individuals and groups to minimize their risk and maximize their recovery potential by applying for judicial review, engage in joint efforts with public agencies, or initiate civil action in contract, tort, restitution or property law.
Most bank account holders have no idea about bank failure, resolution, liquation, creditor hierarchies and even the fundamental aspects of the legal relationship between bank and customer. They deposit money and expect to use payment services and other banking facilities. Bank failure however, triggers an avalanche of unexpected events that reveal the true nature of the position of bank customers. Contrary to what most people assume, account balances and other deposits belong to the bank and not to the account holder. The account holder instead has a contractual claim against the bank that is in lengthy and difficult procedures settled via bank resolution, insolvency and bank liquidation.
Needless to say, the only objective of bank customers is to get as much of their money back. They want to accomplish this without much hassle and within reasonable time. An almost impossible task for busy people, unaware of the exact procedures, and inexperienced in bank resolution, to handle all the different stages of the recovery plan that must also be precisely followed within a predefined timeframe to ensure reimbursement.
Our Clients
A typical bank failure directly impacts thousands of account holders and has an indirect and negative influence on even more parties. Local retail customers are often reimbursed during the statutory administration and deposit insurance phases of the resolution. International creditors and those with high or unsecured account balances may face difficulties to comprehend the procedures, comply with regulatory requirements and meet the deadlines for claim submission.
It is practically impossible to serve all customers of a bank that goes bust. Floris and his team therefore work with international creditors of smaller financial institutions and offshore banks in different countries around the world. Our client base contains individuals, international business corporations and offshore companies. This hardworking group of clients is characterized by their absolute need for maximum reimbursement. Even though it feels wrong for them to pay for and retain legal services to recover their assets, they can allocate a small budget to resolve their financial stress. This budget prevents them from hiring an over-expensive and exclusive law firm, whilst their objective of maximum recovery does not match with retaining a generalist either. They need a proven and thus reliable, tailored and predictable asset recovery system. Such efficiency is provided by Legal Floris LLC to international and non-resident creditors.
Our Work: Regions and Territory
Bank failure is not location dependent. It can happen anytime, anyplace and anywhere, and is either caused by regulatory violations followed by intervention, or, more commonly, due to liquidity shortages. The most important stakeholders in a bank failure, the financial regulator, the shareholders and the creditors, have conflicting objectives. The duty of a regulator is to protect the financial system and maintain public confidence. Shareholders seek to protect their investment and avoid liability. Creditors want their money back. In this cluttered environment, Floris and his team strive for the best position of their clients so that they minimize their risk and maximize their outcome.
Our services are retained by non-resident creditors who need an efficient and affordable approach to reimbursement in a foreign country with an often distinct legal system. An innovative approach to group efforts allows Legal Floris LLC to leverage knowledge and experience into a synergetic and workable format. Floris and his team are physically present in the country and at the location where a bank fails to get a grip on the situation, comprehend the legal system, and to prepare for the claim filing procedure of their clients. This means that Legal Floris LLC operates in any country where the Rule of Law is assured, and feasible prospects for recovery are available!