Bulgaria central bank invites recapitalisation offers from CCB shareholders

Written by on August 22, 2014 in Business - Comments Off on Bulgaria central bank invites recapitalisation offers from CCB shareholders

The Bulgarian National Bank (BNB) said on August 22 that it has asked the two largest shareholders in the Corporate Commercial Bank (CCB) to submit detailed letters of interest in the recapitalisation of the lender by the end of August.

The letters were sent to Bromak, the investment vehicle owned by Tsvetan Vassilev that holds the majority stake in CCB, and Luxembourg-based Bulgarian Acquisition Company II, owned by an Omani government fund, which holds 30 per cent in the bank.

BNB said that the third-largest shareholder, Russia’s Vneshtorgbank Group (VTB) with 9.9 per cent, had announced that it was not interested in the recapitalisation of CCB on June 24.

The central bank has also said that Bromak has made no formal recapitalisation offer, despite the claims made by Vassilev – who clashed with the BNB board repeatedly over the past two months, accusing central bank governor Ivan Iskrov of participating in a conspiracy to bankrupt CCB.

Talks have been held with the Omani sovereign fund, which made its participation in a recapitalisation scheme contingent on clarifying the lender’s current situation and “significant liquidity support from the BNB, which is impossible under current legislation,” the central bank said.

For the first time since CCB has been put under the central bank’s special supervision on June 20, BNB commented on the question, raised repeatedly in recent weeks, why it did not offer liquidity support to the lender, as it did to First Investment Bank (FIBank), which found itself the target of a bank run on deposits on June 27.

BNB said that EU rules on state aid to banks require those banks to prove that they are solvent in order to receive liquidity boosts – but in the case of CCB there was no such certainty, which is why the lender did not qualify to receive funding under the 3.3 billion leva state credit line, which was approved as justified state aid by the European Commission on June 30.

CCB could not have received a BNB loan either, because it did not have any liquid assets to offer as collateral, the central bank said.

On the topic of growing calls from CCB depositors – who have held several small-scale protests over the past two weeks, demanding that the central bank allows them to withdraw their money – BNB said that repayment of deposits, up to the amount guaranteed by law (196 000 leva or 100 000 euro) could only be carried out after CCB’s licence was revoked, which is not the case.

Additionally, the total amount of guaranteed deposits held by CCB was 3.7 billion leva, whereas the state deposit guarantee fund only had 2.1 billion leva available, BNB said. The difference of 1.6 billion leva could only be covered by the state Budget, which had no money earmarked for such operations and the country’s Parliament rejected a Budget revision bill that would have made disbursement possible, before it was prorogued earlier this month.

The central bank said that it expected the 43rd National Assembly, which will take office after the early parliamentary elections on October 5, to make the issue one of its top priorities.

BNB also said that the inability of the parties in the now-departed legislature to reach agreement on legislative changes made it impossible to follow through with initial plans to re-open CCB for business on July 21.

The central bank has earlier postponed the bank’s re-opening to September 21, but hinted once again in its statement on August 22 at the possibility that the conservatorship of CCB would extended further, saying that any decision on the lender’s future would depend on the outcome of the audit of CCB assets, due to be completed by October 20.

(For full coverage of the CCB situation from The Sofia Globe, click here.  Bulgarian National Bank photo: Clive Leviev-Sawyer)

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