Bulgaria’s state deposit guarantee fund signed a loan agreement for 300 million euro with the European Bank for Reconstruction and Development on March 24, the second major funding agreement secured by the fund in the space of one week.
The loan would be used to increase the deposit guarantee fund’s reserves and has a nine-year maturity, with a grace period of six years.
Separately, Finance Minister Vladislav Goranov signed an agreement with EBRD to guarantee the loan. The government guarantee needs to be ratified by Parliament to go into effect.
The EBRD loan is the second agreement secured by the fund inside the past week, with the World Bank saying that its board approved a similar 300 million euro loan on March 18. The money from the two loans will boost the liquidity of the deposit fund, which was caught unprepared by the failure of the country’s fourth-largest lender, the Corporate Commercial Bank.
CCB asked to be put into administration in June 2014 following a bank run, with an audit later finding that the lender held mainly impaired assets, prompting the central bank to withdraw CCB’s banking licence in November 2014.
Set up in the wake of the 1996-97 banking crisis and funded by annual contributions from the country’s commercial lenders, the guarantee fund did not have enough money to pay out the 3.7 billion leva in depositor claims – under Bulgarian law, all depositors are guaranteed to get back up to 100 000 euro – and had to be loaned two billion leva from the government. The fund hopes to pay back the bulk of the loan by suing the lender’s former majority shareholder Tsvetan Vassilev and has hired a consultant to advise it on the asset recovery process.
(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)