EC opens infringement proceedings against Bulgaria over CCB deposits delay

The European Commission has formally launched infringement proceedings against Bulgaria for its failure to correctly transpose sections of the Deposit Guarantee Scheme (DGS) directive in national law and breaching the principle of free movement of capital, the EC said on September 25.

Bulgaria was sent a letter of formal notice, which is the first stage in the infringement proceedings, with authorities in Sofia given until October 15 to respond.

The EU directive on deposit guarantees outlines the procedure to pay out depositor claims and requires the appropriate authority to pay out “duly verified claims of depositors” within 25 days of deposits becoming unavailable. Bulgarian law, however, stipulates that depositor claims are to be paid only if the central bank has revoked the banking licence of the lending institution concerned.

“The DGS directive contains no such requirement. The unavailability of deposits is sufficient to activate the deposit guarantee scheme. In the case in hand, the deposits have been unavailable for three months,” the Commission said, referring to the Corporate Commercial Bank (CCB) and its subsidiary Victoria Bank, which were put under central bank administration on June 20 and 22, respectively.

“Under general EU law principles, national authorities are required to apply the Directive in spite of contradicting provisions of national law,” the EC said in its statement.

“As regards the Treaty principle of free movement of capital, the conservatorship imposed by the Bulgarian authorities on the banks concerned appears to constitute a non-justified and disproportionate restriction to the free movement of capital. The Commission notes in particular that the two banks have been put into conservatorship with a complete suspension of payments and bank activities even though the domestic law allows less intrusive measures, permitting a choice between full and partial suspension of payments and limitation of activities,” the EC said.

The Bulgarian National Bank (BNB) said last week that it envisioned the CCB issue being solved by late November, extending its conservatorship period accordingly. The Commission said that “given the severe consequences for households and companies alike, Commission services have been in close contact with the Bulgarian authorities over the last couple of weeks in order to assist the national authorities in finding an adequate solution.”

The EC also warned that the current situation may undermine public trust in the deposit guarantee scheme in Bulgaria.

The infringement proceedings will put renewed pressure on the BNB and its governor Ivan Iskrov, who have been criticised for their handling of the matter. Iskrov’s position throughout the CCB crisis has been that legal amendments were needed to deal with the situation and provide depositors with access to their money – a stance directly contradicted by the European Commission.

In a separate statement on September 25, the European Banking Authority (EBA) said that it opened an investigation into whether measures taken in the conservatorship of CCB constituted a possible breach of the requirements in the deposit guarantee scheme directive. The EBA said that, following the probe, it could make recommendations to the “concerned competent authority” in Bulgaria, setting out the action necessary to comply with EU law.

Also on September 25, as part of its monthly infringement package, the European Commission asked Bulgaria to amend its environmental legislation, sending reasoned opinions (the second stage of infringement proceedings) on the issue of full compliance with the water framework and drinking water directives. Separately, the Commission asked Bulgaria to abolish minimum tariffs for veterinarian services, which created market entry barriers to foreign service providers. Failure to act on the reasoned opinions within two months could result in Bulgaria’s referral to the European Court of Justice.

(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



The Sofia Globe staff

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