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Bulgaria moves to protect failed bank and depositors

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Bulgaria national assembly source wikipedia

Bulgaria’s parliament passed Wednesday urgent legal changes to protect depositors and a failed bank, the country’s fourth largest, from financial predators.

Corporate Commercial Bank (CCB) collapsed after a run from depositors last June following malicious reports in the press alleging the bank had engaged in dodgy lending and was on the brink of bankruptcy.

The lender was placed under special central bank supervision and stripped of its licence in November, while the country’s deposit insurance fund has compensated people for their guaranteed deposits of up to 100,000 euros, for a total of 1.8 billion euros.

CCB’s major shareholder, businessman Tsvetan Vasilev, has however appealed the revocation of the bank’s licence, putting court insolvency procedures on hold.

In the ensuing limbo, many people sold claims to their unsecured deposits at steep discounts in order to recover at least part of their money.

Many of these claims were bought up by people who must repay loans to the bank, meaning it was unlikely enough would be recovered by the bank to repay the deposit insurance fund.

While experts differed on whether such purchases were legal, Prime Minister Boyko Borisov called them “plundering” and urged the changes to the bank insolvency law in order to stop such practices.

The changes envisage the appointment of two temporary receivers at CCB to challenge in court and possibly overturn any deals that deplete the bank’s assets.

The receivers will be appointed by the deposit insurance fund, which is CCB’s largest creditor right now, and substitute the central bank’s administrators.

Bulgaria’s central bank banking supervision capacities came under severe criticism after the CCB run and governor Ivan Iskrov came under strong pressure to resign.

An IMF mission last week called for “prompt action… to address institutional weaknesses exposed by the bank failure, including in banking supervision.”

CCB owner Vasilev, who went into hiding abroad and is currently appealing his extradition from Serbia, slammed the legal changes.

He said it was unlawful to appoint a receiver at the bank before the licence case was solved and the lender officially entered insolvency procedures



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