Bulgaria’s state-owned gas grid operator Bulgartransgaz has filed lawsuits with two courts and has also lodged a complaint with the central bank, seeking to recoup 28.7 million leva, or 15.3 million euro, in deposits held at the bankrupt Corporate Commercial Bank (CCB), the company’s chief executive said on June 11.
The lawsuits were filed at the Sofia City Court and Sofia Administrative Court against Bulgarian National Bank’s (BNB) bank supervision department and the state, alleging that they failed in their duty to carry out proper oversight of CCB, while the lawsuit against CCB claims that the bank carried out illegal operations with the company’s money, Bulgartransgaz executive director Georgi Gegov told news website Mediapool.bg.
The company seeks to recoup the money, but it was unclear how long the process would take, because if the three institutions refused to hear the cases, they would go to the Supreme Administrative Court, the report said.
The lawsuits concern two specific transactions: one concerning payment of 11.7 million leva, that the company ordered on June 19 2014, a day before CCB asked to be put under the special supervision of the central bank, which CCB cancelled for an unknown reason; the other was CCB accepting the payment of about 17 million leva to Bulgartransgaz two days after it was put into administration, which the bank repeatedly refused to annul, the report said.
Bulgartransgaz is the first state-owned company to sue the central bank over its handling of the CCB crisis, but its case appeared to be a straightforward breach of contractual obligations, Mediapool said. The sum represented about half of the money that Bulgartransgaz held at CCB, with the total amount at 55.1 million leva.
Shortly after CCB asked to be put into administration on June 20 2014, citing liquidity shortages, reports in Bulgarian media claimed that state-owned companies withdrew most of the money they held at the bank, but a number of state institutions were left holding assets in the stricken lender. The Finance Ministry paid out in December 2015 the deposits held by municipalities, worth 76.1 million leva, taking over their claims, but the CCB’s main creditor was the state deposit guarantee fund, which paid out guaranteed deposits worth 3.6 billion leva.
Bankruptcy trustees appointed by the fund faced a difficult task in recouping that amount, given the write-down of CCB’s assets after an audit found that CCB held impaired assets worth 4.2 billion leva. The write-down pushed the lender’s equity into negative figures and prompted BNB to repeal CCB’s banking licence in November 2014.
It is unclear what other companies had large deposits at CCB at the time it went into administration, although that information could be made public should Parliament pass a bill that would lift banking secrecy rules in this instance, which was tabled in Parliament last week. (Other CCB creditors include holders of the bank’s bonds, worth $150 million, which matured in August 2014.)
(For full coverage of the CCB situation from The Sofia Globe, click here. Photo of CCB-branded ATM, with “out of service” sign: Clive Leviev-Sawyer)