Bulgarian Development Bank slams caretaker government’s decision to reduce its capital

Bulgarian Development Bank (BDB), in a statement on April 22, sharply criticised the caretaker government’s decision earlier in the day to reduce the bank’s capital by 1.4 billion euro.

As The Sofia Globe reported earlier, caretaker Prime Minister Andrei Gyurov, speaking at the start of the government meeting, described the bank as the “piggybank of the Borissov – Peevski model”.

A government information service statement on the approval of the capital decrease said that in 2025, the government of the time had increased the bank’s capital by four billion euro.

The 2025 decision provided that the capital increase would be used to carry out the activities envisaged in the bank’s strategy for 2024-2026, approved in 2024.

But, the government information service said, so far the Finance Ministry had received only one request from BDB for the absorbtion of funds, 600 million euro in January 2026, to be used to finance payments under the Investment Programme for Municipal Projects.

The ministry had not received any other requests from BDB to use the funds, and the unabsorbed funds from the capital increase amounted to 1.445 billion euro, stored in the Ministry of Finance’s foreign funds account at national central bank Bulgarian National Bank.

The government statement said that the step would enable the funds to be used for other purposes, in accordance with the priority needs of the state, including for financing social payments and anti-crisis measures to cope with the increase in fuel and commodity prices as a result of the conflict in the Middle East.

The capital reduction will not limit payments by the Bulgarian National Bank under the Investment Programme for Municipal Projects in 2026, as long as resources for that are provided in full with the first disbursement of funds, carried out in January 2026, the statement said.

BDB responded with a statement saying that a possible capital reduction procedure in accordance with the requirements of the applicable banking and commercial legislation would take months and require the approval of all creditors of the Bulgarian Development Bank, including the European Investment Bank and the Council of Europe Development Bank, KfW and other development banks.

During this period, the funds would not be used in practice by either the bank or the government, BDB said.

The proposed capital reduction, without prior coordination with the Bulgarian National Bank and in the absence of an approved regular budget for 2026, would have six direct effects, the statement said.

The BDB statement said that it limits the bank’s ability to make payments under the municipalities’ investment programme.

It limits the bank’s ability to assist the state in implementing anti-crisis measures in connection with a disrupted supply chain, increased fuel prices, and difficulties in various sectors such as transport, agriculture, etc, BDB said.

It puts current financing from international institutions at risk and limits the bank’s ability to attract funds and manage programmes from international financial institutions, according to BDB.

It puts at risk the 246.6 million euro saved under the Recovery and Resilience Plan, provided to the Bulgarian Development Bank for management directly by the European Commission. The funds are for the renovation of multi-family residential buildings, the statement said.

It puts at risk future funding under direct EC programs. A current such programme provides businesses with up to 1.2 billion euro with reduced requirements for co-financing or collateral in partnership with commercial banks.

It limits the ability of the Bulgarian National Bank to fulfill its commitments under the national programme for energy efficiency of residential buildings, the BDB statement said.

“In conclusion, by a decision of the European Commission, the Bulgarian Development Bank was selected to manage EU budget funds under the InvestEU programme,” the statement said.

“BDB is the first and only financial institution in the country with such accreditation , obtained after a rigorous two-year audit process, which confirmed that the Bank’s processes and procedures are in line with the requirements of the EU Financial Regulation.”

It confirms that EU budget funds are managed in a transparent manner, with reliable mechanisms for control, accountability and protection, BDB said.

(Photo: BDB)