Bulgaria’s central bank said on July 11 that it will repeal the banking licence of the Corporate Commercial Bank (CCB) and transfer assets to CCB’s recently-acquired subsidiary, Credit Agricole Bulgaria, which will be nationalised.
The announcement comes following the audit of the assets held by the two lenders, which revealed “actions that are incompatible with the law and good banking practices” in CCB’s case, the Bulgarian National Bank (BNB) said in a statement.
The central bank said that the audit found that large amounts of paperwork concerning loans worth 3.5 billion leva (about 1.8 billion euro) were missing and most likely destroyed before CCB was put under the central bank’s special supervision.
“A large part of this portfolio points towards an extensive connection between the debtors and [CCB] majority shareholder Tsvetan Vassilev,” BNB said. The insufficient information made it impossible to assess the financial situation of the debtors and their ability to service the loans, the central bank said.
Furthermore, the administrators appointed by the central bank found that 205.9 million leva in cash were withdrawn from CCB by a third-party on June 19 and then handed to Vassilev in exchange for only a receipt.
In total, nearly one billion leva had been withdrawn from CCB on June 18-20 as a result of the media spotlight on the bank, BNB said, but gave no further details about the withdrawals.
BNB said that it forwarded the results of the audit to the Prosecutor’s Office, which would decide on further actions. “Investigative institutions can answer the question whether in this way the majority shareholder robbed his own bank,” the central bank said.
BNB said that it would cooperate with prosecutors from now on, but would not comment on the issue further so as not to prejudice any investigation. Instead, the central bank would focus on restructuring the “good side of CCB” in the interest of depositors.
The central bank said that it could not nationalise CCB – comparing it to a “bottomless barrel” – because that would put at risk both public finances and the BNB’s own resources. BNB will instead transfer the “good assets and receivables of CCB to Credit Agricole Bulgaria”, which was well-managed, with a healthy credit portfolio that was backed by sufficient provisions.
“This includes all the deposits of individual and firms, for whom this will represent only a legal and accounting operation,” the central bank said. “Every citizen and every firm will have their accounts, deposits and savings. The only exception will be the majority owner of CCB and companies and individual linked to him.”
Credit Agricole Bulgaria would be nationalised and recapitalised by the Bulgarian state – using the resources of the Bulgarian National Bank, the state fund for deposit guarantees and the state Budget “to the extent that is necessary”.
The lender, whose acquisition CCB closed in May 2014, would also be renamed.
CCB will lose its licence and put in liquidation, with the Finance Ministry and the state fund for deposit guarantees as privileged creditors, BNB said.
CCB, the country’s fourth-largest lender by assets, was put under the central bank’s administration on June 20, only three days after BNB said that it “carefully and closely monitors the development of the banking sector, including the said Bank” that had become the target of “publications and media speculation”.
On July 11, the central bank said that it was aware that there was criticism of the BNB bank supervision department, but pointed out that the central bank governor and its board had no “direct duties, nor rights” to oversee the bank supervision department, which is managed by a deputy BNB governor.
(The incumbent, Tsvetan Gounev, took leave from the central bank on June 18, as a result of pre-trial investigation against him. Although the Prosecutor’s Office is yet to announce formal charges, an anonymous letter sent to Bulgarian media claimed that Gounev was under investigation by prosecutors on charges of mismanagement in office, namely failure to exercise proper oversight of a “bank that has become the centre of attention in recent days”, which the media interpreted as a reference to CCB.)
BNB said that it tabled amendments to change the regulatory framework, giving increased responsibility to the BNB governor and board.
(Bulgarian National Bank. Photo: Clive Leviev-Sawyer)