Bulgarian President Roumen Radev vetoed on February 21 a bill amending the Bank Insolvency Act, arguing that some of the provisions had retroactive effect, which breached the principle of the rule of law.
“The president supports the efforts of the National Assembly for greater efficiency in defending the public interest in bank insolvency, but that must be achieved using constitutional means. In that regard, the head of state has objections to some of the transitional and final provisions of the law, which retroactively re-regulate the legal effects of acquired rights and debts repaid, in breach of the rule of law,” the presidency’s media office said in a statement.
The bill’s authors are Movement for Rights and Freedoms MPs Yordan Tsonev, Delyan Peevski and Hamid Hamid. It aims to suspend the cession contracts involving an insolvent bank’s receivers – deals in which depositors in the insolvent bank would sell their claims to the bank’s debtors, who would then cancel all or part of their debts using the newly-acquired deposit claim.
In the case of Corporate Commercial Bank, the only Bulgarian lender to be declared insolvent in recent years, such cession claims have resulted in the bank’s assets shrinking by as much as 850 million leva, according to some reports in Bulgarian media.
The bill appears to be aimed squarely at those cession contracts, with Peevski saying last year that the amendments would provide a legal framework to “oppose the vicious financial pyramid operating model of the bank, put into practice by Tsvetan Vassilev and his entourage, as well as the criminal organisation set up after the bank’s shutdown to divert its assets.”
Vassilev, who is fighting extradition from Serbia, is on trial on charges of large-scale embezzlement that led to CCB’s collapse. CCB, Bulgaria’s fourth-largest lender by assets at the time, asked to be put under special supervision of the Bulgarian National Bank (BNB) on June 20 2014, following a bank run.
An audit several month later found that the bank held mainly impaired assets, requiring a write-down of 4.22 billion leva (about 2.16 billion euro), which led to CCB losing its banking licence in November 2014 and triggered the payout of 3.7 billion leva in depositor claims, which required a government loan of more than two billion leva for the state deposit guarantee fund to meet all claims.
Vassilev has claimed repeatedly that the investigation against him was politically motivated and blamed the events that led to CCB’s insolvency on his former business associate Peevski.
In his veto motives, Radev also called on MPs to openly discuss the precise amounts of money affected by CCB cession contracts and their impact on CCB’s assets. “Only in this way would the defence of public interest, as the bill purports to do, acquire tangible dimensions,” the presidency said.
(For full coverage of the CCB situation from The Sofia Globe, click here. Shuttered CCB branch in Sofia’s Lozenets borough photo: Alex Bivol)