Bulgaria central bank puts second lender under special supervision

Two days after putting the Corporate Commercial Bank (CCB) under special supervision, the Bulgarian National Bank said on June 22 that it put CCB’s recent acquisition, Credit Agricole Bulgaria, under special supervision as well. Under Bulgarian law, this means a temporary suspension of shareholders’ rights and a complete freeze on all banking operations.

As with CCB, the central bank appointed two administrators that will run Credit Agricole Bulgaria following the sacking of the lender’s management and supervisory boards. BNB said that both CCB and its subsidiary would re-open for business at 9am on July 21.

BNB re-iterated its intention to have outside auditors assess CCB group’s balance sheet, saying on June 22 that it ordered the administrators to carry out this task within 10 days. Afterwards, BNB will “undertake the steps to write off the shareholder capital and the divestment of shareholder rights in line with procedures outlined by law”.

Under the law, the special supervision proceedings affect shareholders with a stake of at least 10 per cent – in CCB’s case, that is majority shareholder Tsvetan Vassilev and Luxembourg-based Bulgarian Acquisition Company II, owned by an Omani government fund, which holds 30 per cent in the lender. Russia’s Vneshtorgbank (VTB) Group, which has 9.9 per cent, is not subject to divestment of shareholder rights.

The central bank said that, with the government’s support, it would “undertake measures to boost [CCB’s] equity capital and will order, within its legal prerogatives, that the capital hike is taken on by the state Bulgarian Development Bank and the Bulgarian Deposit Insurance Fund.”

BNB also said that the central bank and the government would provide “the necessary liquidity support for the banking group in order to satisfy in full the bank’s commitments to its customers.”

CCB acquired Credit Agricole Bulgaria earlier this year for 92 million leva and received BNB’s regulatory approval last month. Reports in Bulgarian media claimed that CCB did not intent to merge the smaller lender’s operations with its own, maintaining it as a separate entity. CCB had assets of 6.7 billion leva (about 3.42 billion euro) at the end of September 2013, while Credit Agricole Bulgaria had assets of 480 million leva at that time.

CCB asked to be put under special supervision in a letter sent to the BNB on June 20, notifying the central bank that it had stopped all payments and other bank operations because of insufficient liquidity, BNB said in a statement.

Later that day, BNB governor Ivan Iskrov said that the lender became the subject of a bank run this week, with a large amount of withdrawals leaving the lender with insufficient liquidity. He blamed the anonymous letter sent to the media on June 18, in which the author claimed that the BNB deputy governor in charge of bank supervision Tsvetan Gounev was the target of a pre-trial investigation.

The letter alleged that Gounev was under investigation for failing to exercise proper oversight of a “bank that has become the centre of attention in recent days”, but did not name the bank. Bulgarian media interpreted the letter to be referring to CCB after last week prosecutors searched and seized documents “at offices of companies in Sofia” in buildings that are home to CCB as well as TV7 and News7 channels. In separate statements, the bank and the media outlet denied being the subject of investigations.

CCB’s majority shareholder Vassilev has made headlines in recent weeks as the target of allegations claiming that he ordered the murder of Delyan Peevski, the controversial figure to whom Vassilev long has been seen as close in business relations – but recent media reports, confirmed by Vassilev himself, suggested that the two had fallen out.

(Bulgarian National Bank. Photo: Clive Leviev-Sawyer)



The Sofia Globe staff

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