site.btaParliament Ratifies Sovereign Guarantees for EUR 600 Mln Loans to Replenish Bulgarian Deposit Insurance Fund

Parliament Ratifies Sovereign Guarantees for EUR 600 Mln Loans to Replenish Bulgarian Deposit Insurance Fund

Sofia, June 9 (BTA) - Parliament Thursday ratified sovereign guarantee agreements on two loans, one from the European Bank for Reconstruction and Development (EBRD) and another one from the International Bank for Reconstruction and Development (IBRD), aggregating 600 million euro.

The 300 million euro to be extended by the EBRD will replenish the reserves of the Bulgarian Deposit Insurance Fund (BDIF) and will help optimize its financing structure. The loan will be repaid in four equal monthly installments, starting on June 17, 2022 and ending on June 17, 2025. The loan has been contracted at a standard EBRD commitment fee and half front-end commission, paid up-front. At the borrower choice, interest will be paid on a floating rate basis with a fixed margin above the floating 6-month market rate, and the borrower has the option, as an alternative, to pay interest on a fixed rate basis for the whole or part of the amount due.

The 300 million euro to be extended by the IBRD will complement the EBRD loan and will contribute to a replenishment of the BDIF reserves. Principal is to be repaid by annual installments, starting on June 15, 2022 and ending on June 15, 2026. The loan has been contracted at the standard IBRD front-end commission and commitment fee and at an interest rate linked to 6-month EURIBOR and a fixed spread. Interest and the commitment fee are payable twice a year, and the front-end commission is self-financed by the borrower.

During the plenary debate, the parliamentary groups of BSP Left Bulgaria, Ataka and ABV said they will not back the guarantee agreements. A motion by the Left that the resolution be put to a roll-call vote and that the sitting be broadcast live on National Television and National Radio was defeated.

"In this case, we are asked to sign a check for 300 plus 300 million euro, without the Finance Ministry giving us an estimate," Roumen Gechev MP of BSP Left Bulgaria argued. "The interest rate is market-based, but I didn't see any number," he pointed out. Gechev asked why the 11 billion fiscal reserve is not used and why the BDIF does not borrow from Bulgarian commercial banks.

Nikolai Alexandrov MP of Ataka also noted that the interest rate is not clear and that the way the BDIF will use the money is not specified.

Radan Kanev MP of the Reformist Bloc said that the proposed resolution gives rise to serious concern. "It implies either a failure of the budget policy for this year, or a failure of the Fund in its activity to recover Corpbank's receivables, which is why it needs additional replenishment, or an immediate threat of a need of the Fund covering future obligations of the Corpbank type," he commented.

"This debate would not have been necessary if Corpbank has not collapsed," said Peter Slavov MP of the Reformist Bloc.

Finance Minister Vladislav Goranov explained that this is not a government loan but sovereign guarantees of a loan extended to a legal person. He noted that there are 46,000 million leva guaranteed deposits in the Bulgarian banking system, and at the time before Corpbank's failure the BDIF held little over 500 million leva. "The risks for the State are negligible," Goranov commented. "I think this is a good solution, enabling the Fund to operate at a minimum risk to the State," he pointed out. "The guarantee agreements we propose are at an interest rate that the Bulgarian commercial banks are unable to provide, we are talking about 1 per cent or slightly over 1 per cent," he said. He dismissed as speculation allegations that new government debt is being incurred and that the Exchequer will have to repay anything in 2022 or 2025.

BDIF Management Board Chairman Radoslav Milenkov, who attended the plenary debate, took questions from Gechev and Martin Dimitrov MP of the Reformist Bloc.

The BDIF was drained by the payment of 3,700 million leva guaranteed deposits at the failed Corpbank. The Fund now owes the Exchequer 1,700 million leva. According to Corpbank's trustees in bankruptcy, the AlixPartners consultants and Finance Minister Vladislav Goranov, hardly more than 15-20 per cent of the money siphoned off from Corpbank will be recovered.