Bulgarian Parliament overturns presidential veto on amendments to bank insolvency law

Written by on March 7, 2018 in Bulgaria - Comments Off on Bulgarian Parliament overturns presidential veto on amendments to bank insolvency law

Bulgarian MPs voted on March 7 to overturn President Roumen Radev’s veto on the bill of amendments to the Bank Insolvency Act. The motion carried with 129 MPs in favour, 40 opposed and no abstentions.

The two parties in the government coalition, Prime Minister Boiko Borissov’s GERB and the United Patriots group of nationalist parties, were joined by the opposition Movement for Rights and Freedoms (MRF), whose MPs tabled the amendments, in overturning the presidential veto. The main opposition Bulgarian Socialist Party and Volya, the smallest party in the National Assembly, voted against the motion.

Radev vetoed the bill on February 21, 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 at the time.

The bill, authored by MRF MPs Yordan Tsonev, Delyan Peevski and Hamid Hamid, 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.

Speaking during the debate that preceded the vote on March 7, Tsonev said that more than 200 lawsuits have been filed in the courts to cancel cessions involving CCB assets worth 1.17 billion leva. Additional provisions in the bill would allow filing more lawsuits concerning cessions involving a further 233 million leva worth of CCB assets, he said.

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.

The bank’s former majority shareholder and chief executive, Tsvetan Vassilev, who is fighting extradition from Serbia and has been charged with large-scale embezzlement that led to CCB’s collapse, 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.

(For full coverage of the CCB situation from The Sofia Globe, click here. Bulgarian Parliament photo: Clive Leviev-Sawyer)

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