site.bta Bulgarian National Bank Tells European Banking Authority that Compliance with EU Rules Will Be Improved

Bulgarian National Bank Tells European Banking Authority that Compliance
with EU Rules Will Be Improved

Sofia, October 23 (BTA) - The Bulgarian National Bank (BNB) said
that it has responded to an October 17 letter by the Chairman
of the European Banking Authority (EBA) in connection with the
ailing Corporate Commercial Bank (Corpbank). In its response,
sent on October 21, BNB said that relevant EU law does not give
direct powers to the Bulgarian competent authorities in the
Corpbank case, but the country is taking steps to improve
compliance with EU rules.

EBA claims that BNB and the Bulgarian Deposit Insurance Fund
(BDIF) have breached the EU Deposit Guarantee Schemes Directive
(Directive 94/19/EC). EBA has urged BNB to ensure that Corpbank
depositors will obtain access to deposits protected under the EU
directive by October 21. The directive aims at ensuring
depositor protection for deposits of up to 100,000 euro.

Corpbank suspended all operations on June 20 after a run by
depositors left it illiquid, and on the same day BNB placed it
under special supervision for a maximum of six months to allow a
thorough audit and possible restructuring.

BNB argued in its response to EBA that the definition of an
"unavailable deposit" contained in the EU Deposit Guarantee
Schemes Directive cannot be applied directly to the case of
Corpbank, because the definition is not unconditional and lacks
in clarity and precision. The definition does not give direct
powers to a competent authority in an EU member state, BNB said.

The directive prescribes that deposits may be declared
"unavailable" by "the relevant competent authorities," but these
authorities are designated in accordance with national law and
their powers are also defined by national law, BNB noted. In
this particular case, the only right which BNB possesses
pursuant to national legislation is to revoke the licence of
Corpbank if certain conditions defined in the Credit
Institutions Act are in place. Any other decision by BNB would
be invalid. Licence revocation is the only instrument which BNB
possesses under national law to declare deposits in a credit
institution "unavailable," BNB said.

This also holds for BDIF (the Bulgarian Deposit Insurance Fund),
the central bank went on to say. BDIF may not repay depositors
the guaranteed amount of their deposits unless BNB has revoked
the licence of the depositors' bank.

BNB further argued that although the alleged noncompliance with
EU rules concerns BNB and BDIF, neither institution is competent
to revise national legislation in order to correct this
noncompliance. Only the Bulgarian Parliament is competent to do
that. Besides that, national legislation does not entitle BNB to
give partial access to bank deposits.

BNB also notified EBA that three auditor firms: Ernst & Young
Audit OOD, Deloitte Bulgaria OOD and AFA OOD, have analyzed and
valued Corpbank's assets.

BNB updated EBA on the measures taken so far in the Corpbank
case.

Despite its objections, BNB conceded that Bulgarian legislation
leaves something to be desired as to the need for depositors to
obtain prompt access to the guaranteed amount of their deposits.
Therefore, experts are writing a new law on bank deposit
guarantees and there is a deadline set for adopting the law, BNB
said.

Bulgaria has also made a commitment in connection with the
transposition of the new Directive 2014/59/EU into national
legislation. (Directive 2014/59/EU establishes a framework for
the recovery and resolution of credit institutions and
investment firms.) The Bulgarian commitment is that the country
will make substantial changes to the national procedure for
placing banks under special supervision pursuant to the Credit
Institutions Act. New legislation which is being written will
take into account the observations of EBA and the European
Commission, BNB said.

BNB expressed its readiness to continue to provide expertise to
the competent Bulgarian authorities in the process of amending
legislation in order to ensure full compliance with EU rules.

BNB noted that EBA's recommendations are not compulsory or
legally binding for the competent authorities.