The World Bank has approved a 300 million euro loan to Bulgaria’s state deposit guarantee fund as part of a project that aims to fund’s financial and institutional capacity, the international lender said in a statement.
The loan was approved by the World Bank’s board of directors on March 18 and has a 10.5-year maturity, with a grace period of six years, the statement said. This is the first loan taken by Bulgaria from the World Bank since 2009.
It will help rebuild the fund’s reserves “in the aftermath of the fourth largest commercial bank failure in 2014”, the World Bank said, referring to the Corporate Commercial Bank (CCB), which asked to be put under the central bank’s supervision in June 2014.
An audit later found that CCB held mainly impaired assets and the lender had its banking licence withdrawn in November 2014, with payment of 3.7 billion leva (about 1.9 billion euro) worth of guaranteed deposit claims starting a month later. Under Bulgarian law, all depositors are guaranteed to get back up to 100 000 euro – the number of deposits held by an individual or company is immaterial, only the total amount in their accounts.
The deposit guarantee fund did not have enough money to pay out all claims and had to be loaned two billion leva from the government. The fund hopes to pay back the bulk of the loan by suing the lender’s former majority shareholder Tsvetan Vassilev and has hired a consultant to advise it on the asset recovery process.
(For full coverage of the CCB situation from The Sofia Globe, click here. Logo and corporate motto of Corporate Commercial Bank – “our clients are dear to us” – from a CCB advert. Screengrab from corpbank.bg)