Bulgarian National Bank (BNB) said on November 19 that it authorised the administrators of Victoria Bank, a subsidiary of the Corporate Commercial Bank (CCB), to begin the sale of the lender’s assets to raise funds to pay out all depositor claims starting December 12.
CCB acquired Victoria Bank, then Credit Agricole Bulgaria, in May for 92 million leva. The central bank approved the deal just weeks before CCB itself asked on June 20 to be put under BNB’s special supervision following a bank run, with Victoria Bank following its parent bank into conservatorship on June 22.
After an initial review of the lender’s assets, BNB said that Victoria Bank was well-run and had no inherent troubles – other than being owned by CCB, which was one of the reasons why it did not qualify for state liquidity aid. Given Victoria Bank’s financial health, BNB initially suggested folding “the healthy part” of CCB into its subsidiary and nationalising Victoria Bank, but such a move required legislative changes that the previous legislature refused to consider.
BNB said that because it stripped CCB of its banking licence on November 6, the CCB administrators could not enter into any transactions involving the lender’s stake in Victoria Bank, ruling out its sale. At the same time, Victoria Bank met all regulatory provisions, but lacked the liquidity to pay out all receivables, BNB said.
The only possible solution was to sell parts of Victoria Bank’s loan portfolio to raise enough money to meet the lender’s commitments to its customers, the central bank said. To that end, BNB authorised in September a split of Victoria Bank’s portfolio into five lots, which were put up for sale and drew bids from seven other banks before the November 14 deadline, the central bank said.
BNB said that it ordered Victoria Bank’s administrator to begin the sale proceedings of four of those lots to the lenders that made the best offers – small business loans and consumer loans with mortgages to Tokuda Bank, mortgage loans to Societe Generale Expressbank, and consumer loans with credit cards to Central Cooperative Bank.
BNB said that the offers submitted for those lots came close to meeting 100 per cent of the value of the loans included in the respective lots, but no detailed breakdown of how much each lot was worth. At the end of March, the last quarter for which BNB has provided data on Victoria Bank’s balance sheet, it had 403 million leva in total assets, including 282.8 million leva in loans.
The fifth lot, loans to large and medium corporate customers, drew only bid that did not cover all the loans included in the offer and would not be sold.
BNB said that the proposed piecemeal sale of Victoria Bank’s loan portfolio would raise 180 million leva (excluding the loans to large and medium corporate customers), which was enough to meet full repayment of deposits in Victoria Bank (including those higher than the 196 000 leva amount guaranteed by the state). The lender’s total deposit portfolio was 160 million leva, BNB said.
Victoria Bank’s administrators should ensure that the sales go through by December 10, so that the bank could begin paying out depositor claims on December 12, the central bank said. The lender will be able to resume all banking operations at that point, but BNB extended its special supervision of Victoria Bank by one month to December 22, giving it an additional 10 days it has to start meeting commitments to its other creditors, namely its parent bank CCB.
If at that point Victoria Bank does not meet regulatory requirements, it would be subject to provisions of the Credit Institutions Act, BNB said without giving further details. Such provisions include the prospect of stripping the lender of its licence and opening insolvency procedures, as is the case with CCB, where the first insolvency hearing by the Sofia City Court has been scheduled for November 24.
(For full coverage of the CCB situation from The Sofia Globe, click here. Logo of Victoria bank from tbvictoria.bg)