Factfile: Bulgaria Corporate Commercial Bank insolvency four years on

Four years after the official insolvency date of the Corporate Commercial Bank (CCB), Bulgaria’s fourth-largest lender by assets at the time of its demise, these are some of the major repercussions that CCB’s collapse has brought about.

– CCB asked to be put under central Bulgarian National Bank’s supervision on June 20 2014 (with CCB-owned Victoria Bank, the Credit Agricole subsidiary acquired just months earlier, following suit on June 22 2014). It lost its banking licence on November 6 2014, which was also the insolvency date set by a court decision, but an appeal lodged by the central bank later resulted in a court ruling that pushed the official insolvency date to June 20 2014.

– Although the bank’s depositors were unable to withdraw their money until December 2014, the process of settling their claims has proceeded smoothly after that point, with the state deposit guarantee fund paying out 3.695 billion leva (about 1.884 billion euro) as of June 15 2018.

– The fund did not have enough money at the time and required the injection of about two billion leva from the government, which pushed the country’s Budget deficit to 3.7 per cent of GDP in 2014, in order to pay out all claims. The money was made available on condition that the loan be repaid at a later date.

– A full audit of CCB was ordered on July 31 2014 and completed on October 20, finding that the bank’s books were full of impaired assets, requiring a write-down of 4.22 billion leva (about 2.16 billion euro) of CCB’s total assets, which had a book value of 6.66 billion leva at the end of September 2014.

– An investigation by consultants AlixPartners Services UK LLP, the company hired by the state deposit guarantee fund to track and recover money from the insolvent lender – the results of which were made public after Parliament mandated it despite the consultant’s opposition in May 2016 – claimed that companies directly or indirectly linked to Tsvetan Vassilev, CCB’s majority shareholder and chief executive, received an estimated 2.5 billion leva, or about 1.3 billion euro, in loans from the bank.

– As events unfolded and with CCB’s future in limbo, an international arrest warrant was issued for Vassilev in August 2014. A month later, Vassilev turned himself in to authorities in Serbia. Vassilev has been fighting extradition from Serbia, successfully so far, claiming that he was a scapegoat for political interests and blaming former business partner Delyan Peevski, the controversial MP for the Movement for Rights and Freedoms, for CCB’s collapse. Two decisions by a first-instance court in Serbia to extradite Vassilev have been overturned on appeal.

– In July 2017, following a lengthy investigation that resulted in more than 200 000 pages of evidence, Bulgaria’s prosecutor’s office lodged court action against Vassilev and 17 other defendants, mostly former senior CCB employees but also two auditors from KPMG Bulgaria and three former employees of the Bulgarian National Bank, including former deputy governors in charge of bank supervision Tsvetan Gounev and Roumen Simeonov.

– Vassilev was indicted on a total of 146 counts. He and the other defendants are alleged to have embezzled a total 2.56 billion leva (about 1.31 billion euro), as well as 205.9 million leva in cash. Vassilev is also alleged to have led and spearheaded an organised crime group.

– After several failed attempts to hold a first hearing in the case, the specialised anti-corruption court began proceedings in March 2018. At the request of defence counsel, the trial opened with the reading of the indictment bill in May. Given that even the operative part of the indictment runs in excess of 5000 pages, the process is still under way, with the examination of evidence and witness hearings not expected until later this summer or even autumn.

– Bulgarian National Bank governor Ivan Iskrov, who resisted calls to resign during the early months of the CCB saga, lasted in his job until June 2015, when he stepped down with just several months left on his second six-year term. He was replaced by Dimitar Radev, previously a senior economist with the International Monetary Fund.

– Under Radev, the central bank carried out a stress test of Bulgaria’s lenders, which was completed in August 2016 and found that none of the country’s banks required state support, although three of them were required to increase their capital buffers.

– The stress test was carried out after Bulgaria changed its laws to strengthen the country’s banking system, which mandated such an asset review. Other legislative changes prompted by the CCB collapse included amendments in June 2015 that ended bank privacy for insolvent banks, the amendments that required the AlixPartners report be made public in May 2016 and, more recently, a bill passed in February 2018 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. These last set of amendments, which have been criticised by legal experts for introducing a retroactive effect, are the subject of an ongoing Constitutional Court case.

(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)



The Sofia Globe staff

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