site.btaNew Bill on Bank Deposits Insurance Passes on First Reading

New Bill on Bank Deposits Insurance Passes on First Reading


Sofia, February 19 (BTA) - Parliament adopted Thursday in
principle a new bill on guaranteeing bank deposits put forward
by the government. It transposes a EU directive of April 16,
2014 in regards to bank deposit guarantee schemes which offer a
clear scope of the guarantees and shorter payout deadlines.

The scope of the guarantee is preserved and includes deposits of
all natural and juristic persons (except for professional
investors), state institutions and bodies of local
self-government.

The new legislation scraps the exceptions for persons who have
enjoyed preferential interest rates and holders of shares which
entitle them to over 5 per cent of the votes at the general
meeting of the bank shareholders, the members of the supervisory
and managing bodies, individuals who are partners in the
specialized audit companies as well as the spouses and first-
and second-degree relatives of the said persons.

Under certain conditions, resources from the deposits guarantee
fund may be used to prevent bank failures or support troubled
banks.

This was the most disputed provisions of the new legislation.

Roumen Gechev of the Left argued that a parallel central bank is
effectively being created. "This law allows a possibility -
against which my colleagues and myself are strongly against -
for the guarantee fund to perform the functions of a bank with a
blank cheque which can be used and provide a loan any time a
commercial bank gets in trouble," he said. "It tells the
private banks that they can do anything they please and
Bulgarians will always be there to bail them out of their own
pocket."

The Reformist Bloc also had strong words against this provision.
Peter Slavov offered a hypothetical in which a bank is first
supported by the fund but then fails nonetheless and the
guaranteed money of its depositors have to be paid out. "The
question is what money will pay out the guaranteed deposits? The
public sector will have to pay twice," he said.

The Patriotic Front were opposed to allowing the government -
not Parliament - to decide what loan to provide in a critical
situation from the deposits guarantee fund.

The majority voted down revisions to the effective Bank Deposits
Guarantee Act.

They also adopted revisions to the Financial Instruments Market
Act to transpose the European directives and regulations. The
revisions allow the Financial Supervision Commission to make
public the stress tests of investment intermediaries.