Bulgaria’s Finance Ministry has published a new draft bill on deposit guarantees, implementing EU rules into national law, meant to ensure quicker payout of depositor claims by the state deposit guarantee fund.
The ministry posted the bill, and a memorandum explaining the reasoning for the legislative changes, on its website late on November 12 for public discussion. Interested parties have until November 26 to submit feedback on the bill, which may be used in the final draft submitted for government approval before it is put forward to Parliament.
The Finance Ministry said that the new bill was meant to improve the current law and fully implement the provisions of the EU deposit guarantee directive. In September, the European Commission launched infringement proceedings against Bulgaria for failing to correctly transpose parts of the directive in national law and breaching the principle of free movement of capital.
EC’s main objection was that Bulgaria did not allow for “duly verified claims of depositors” to be paid out within 25 days of deposits becoming unavailable. Bulgarian law currently stipulates that depositor claims are to be paid only if the central bank has revoked the banking licence of the lending institution concerned.
As a result, depositors in the Corporate Commercial Bank (CCB) – which was put under central bank conservatorship and had all banking activities suspended on June 20 – have been unable to access their funds. Payouts are scheduled to begin on December 4, after the Bulgarian National Bank stripped CCB of its licence on November 6.
The new bill envisions payouts starting within seven days of deposits becoming unavailable. If the provisions are passed, Bulgaria would become one of the first EU countries to adopt the new payout deadline, which all EU states must transpose into national law by 2024.
Other provisions of the new bill envision expanding the role of the state deposit guarantee fund, allowing it to step in “with alternative preventative measures” to avoid more costly deposit payouts further down the line; changes to the mandatory contributions made by banks operating in Bulgaria, which would now take into account a lender’s risk profile; expanding the list of debt instruments that the fund can invest in; improved co-operation and information exchange with deposit guarantee institutions in other EU countries.
The value of guaranteed deposits will remain unchanged at 100 000 euro (or 196 000 leva), but several exceptions are introduced for deposits of up to 250 000 leva – if such deposits are the result of certain transactions like property sales, divorce settlements or pension payouts. However, such deposits would be subject to increased protection for only the first three months, after which point only they would be guaranteed only for up to 196 000 leva.
The ministry said in its memorandum that the bill would have no direct or indirect impact on the state Budget, but did not clarify what impact, if any, the bill would have on the status of CCB depositor claims, given that it could become law while payout settlement could be still ongoing.