A year after the Corporate Commercial Bank (CCB) asked to be put under the central bank’s administration on June 20 2014, Bulgaria has made very little headway towards a satisfactory explanation on how the bank was allowed to spiral so badly out of control.
There has been no shortage of accusatory fingers being pointed in all directions – CCB former majority shareholder Tsvetan Vassilev’s every statement is littered with claims of shadowy conspiracies against him, while his opponents allege that he was using CCB as his personal piggy bank, handing loans to his other companies to acquire assets in a number of industries, often without seeking any collateral for those loans.
One positive development was that depositors with up to 100 000 euro (or 196 000 leva) got their money back – unlike customers in several banks that defaulted during Bulgaria’s 1996/97 banking crisis – meaning that the state deposit guarantee fund, set up in the wake of that earlier banking collapse, worked.
But the money was paid out nearly six months after CCB stopped all operations, and at a large cost to all taxpayers, as the government had to lend the fund about two billion leva to cover all depositor claims. Now the fund faces the difficult task of recouping enough from CCB to pay back that loan (it recommended earlier in June 2015 that bankruptcy receivers sign a contract with Britain’s AlixPartners Services UK LLP to track and recover the money), while other large depositors – a list that reportedly includes more than one state-owned company – and holders of CCB’s bonds worth $150 million are so far down the line of creditors, it is unclear whether they will get anything.
Legislative proposals have focused on the consequences of CCB’s collapse, such as getting bankruptcy receivers in a few weeks early or lifting banking secrecy rules, instead of seeking to fix the cause. It was not until this month, and only after a repeat reminder from the European Commission, that Bulgaria’s Cabinet finally approved a bill implementing EU’s bank recovery directive, the very mechanism intended to ensure that banks on the verge of insolvency can be restructured without government assistance.
Little has been heard, likewise, since the July 2014 meeting hosted by the country’s presidency, about Bulgaria starting proceedings to join the EU’s single supervisory mechanism of the European Central Bank as a first step towards joining the EU banking union.
Progress in the judiciary has also been limited – although prosecutors have issued indictments against a dozen individuals, there is no clarity when the case would be ready for trial. Meanwhile, the former majority owner Vassilev (who is accused of siphoning off about 205 million leva from the bank, but denies all charges) continues to fight, thus far successfully, efforts to extradite him from Serbia.
His efforts in Bulgarian courts, appealing against the Bulgarian National Bank (BNB) decision to repeal CCB’s banking licence, have been decidedly less successful. (A second appeal, lodged by BNB against the date of insolvency, is due to be ruled on within the next month.)
As the saga drags on, no one can claim that they will emerge untarnished from the entire affair – political parties, busy sniping at each other about who provided more “political protection” for CCB over the years, least of all – but the biggest loser (besides the taxpayers saddled with the bill for what was in all but name a bailout) has been the central bank and its governor, Ivan Iskrov.
His controversial handling of the affair – lurching from strident calls for politicians to do something to retreating into lengthy silences, punctured only by complaints that calls for his resignation were interfering with the central bank’s independence, while shifting responsibility to the deputy governor in charge of bank supervision – has, going by opinion polls, diminished public trust in one of the few state institutions that still had a high approval rating.
It appears nearly certain that Iskrov will go as soon as Parliament can, by law, appoint his successor, which could be as early as July 10. Ahead of that successor will lie a monumental task.
(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 corpbank.bg)