site.bta Parliamentary Parties Unanimous on Legislative Amendments Enabling Appointment of Temporary Trustee in Bankruptcy for Corpbank

Parliamentary Parties Unanimous on Legislative Amendments Enabling Appointment of Temporary Trustee in Bankruptcy for Corpbank

Sofia, March 13 (BTA) - Draft amendments institutionalizing a
temporary trustee in bankruptcy for banks will be submitted to
Parliament on Monday and are expected to be voted through next
week, Bulgarian Finance Minister Vladislav Goranov told a news
conference here on Friday. The new set of revisions will reach
the legislature before a bill amending the Bank Bankruptcy Act
comes up for a conclusive second reading.

"For the first time, we can see a bill signed by all political
parties. This shows that consensus can be reached on matters of
national significance," Goranov commented, emerging from his
second meeting, after one on Thursday, with the political forces
 represented in Parliament.

The Finance Minister decided to consult the parliamentary
parties after the Sofia
City Court on Thursday dismissed a motion by the Bulgarian
Deposit Insurance Fund (BDIF) to appoint a temporary trustee in
bankruptcy for Corpbank and all parliamentary parties agreed on
the adoption of revisions of the Bank Bankruptcy Act to make
that possible and stop the draining of the remaining Corpbank
assets.

On June 20, 2014, having suspended all operations after a panic
run by depositors left it illiquid, Corpbank (Bulgaria's fourth
biggest lender) was placed by the BNB
under special supervision for a maximum of six months to allow a
 thorough audit and possible restructuring. The bank's
management was entrusted to BNB-appointed conservators.

A decision of November 5, 2014 by which the BNB Governing
Council withdrew Corpbank's banking licence is being appealed by
 shareholders in the bank before the Supreme Administrative
Court (SAC). On January 13, 2015, a three-judge SAC panel left
the appeals without consideration and dismissed the proceeding.
This ruling was
appealed, too, before a five-judge SAC panel, and the case has
been pending before this last instance for more than a month
now.

Under the draft amendments, a temporary trustee in bankruptcy
for a bank will be vested with broader powers than a commercial
trustee in bankruptcy so as to manage and conserve a failed
bank's assets in the period between the withdrawal of its
licence and its adjudication in bankruptcy by the court, Goranov
 specified.

"Our proposals to ensure publicity and control over the work of
trustees in bankruptcy were accepted," Maya Manolova MP of
BSP-Left Bulgaria said. "We expect that what happened under the
conservators' management will no longer be possible because of
the control procedures," she added. She hopes that the
amendments will also frustrate steps already taken to plunder
Corpbank's assets. Manolova specified that the BDIF-proposed
temporary trustees' appointment by the court will terminate the
conservators' credentials. The trustees will be under an
obligation to publish all actions they take on the BDIF Internet
 site, the MP said. 

On behalf of his parliamentary group, Yordan Tsonev MP of the
Movement for Rights and Freedoms said he was "exceedingly
satisfied" to sign the proposed amendments.

Peter Slavov of the Reformist Bloc pointed out that his
parliamentary group was actively involved in drafting the
revisions. "At last, we have a legislative framework providing
for the possibility to commission a specialized person or
institution for the investigation of bank failures," Slavov
said. He explained that the temporary trustee in bankruptcy will
 be empowered to commission such a firm, and it will trace the
cash flow out of Corpbank to its recipients and find how the
money was spent. The register of trustees in bankruptcy will be
open to public inspection.

Parliamentary Finance Committee Chair Blames Corpbank
Conservators for Asset Stripping

"The conservators that were appointed at the failed Corpbank are
 managing something that is not a bank, and in the meantime
Corpbank's assets have shrunk by 1 billion leva," National
Assembly Budget and Finance Committee Chair Menda Stoyanova said
 on bTV Friday morning. Corpbank's conservators later issued a
statement denying her accusations of asset stripping.

Stoyanova recalled that an audit report set the amount of loans
extended by Corpbank with good collateral at some 1.8-2 billion
leva and said that these have since contracted by 1 billion.
"This means that, despite the legal restrictions, the Corpbank
conservators have allowed assignments and takeovers."

The MP commented that it was the obligation of the Bulgarian
National Bank (BNB) to find a way during the period of special
supervision to help the bank recover and preserve its assets.
"It failed in both, but the [Ad Hoc Parliamentary] Committee of
Inquiry is yet to prove this," she said. "The banking
supervision authorities have failed with Corpbank, and they may
be failing in other cases we know nothing about."

Stoyanova believes that the appointment of a trustee in
bankruptcy at Corpbank will stop the siphoning of the bank and
allow the creditors to litigate.

She noted that BNB Governor Ivan Iskrov has a moral obligation
to step down over the handling of the Corpbank case. "It was
during his term in office that we saw
happening what everybody was saying would never happen in
Bulgaria."

The MP confirmed press reports that the acting BNB Deputy
Governor and Head of the Banking Supervision Department, Neli
Kordovska, withdrew an over 60,000 euro deposit she had with
Corpbank hours before the bank shut down. Stoyanova commented
that Kordovska may have done it lawfully, but she was obviously
able to rescue her money thanks to insider information. "Many
people at the central bank had inside information about the
goings-on at Tsvetan Vassilev's bank days before it was
placed under special supervision," she said.

Only three days before the appointment of conservators at
Corpbank, the central bank issued a statement saying that the
bank was liquid and functioning normally, and had high capital
adequacy.

In a related development, Prime Minister Boyko Borissov
explained to journalists that, under the law, conservators
monitor and authorize, whereas the trustee in bankruptcy is the
one who safeguards the assets. He thanked the parties which
backed the Government's idea to speed up the process of
appointing trustees in bankruptcy for Corpbank. In his words,
for months now, the appointment of trustees in bankruptcy has
been blocked by court procedures while "the plants are going one
 by one." Borissov recalled that assignments were banned after
Corpbank's failure but argued that this ban is not observed.
More than 800 million leva have already been rechannelled "on
the brink of the law", he pointed out. "What I heard from an
ambassador, who came to intercede on the subject, if Vivacom,
too, has somehow been bargained away, this will top 1.5 billion
leva. That's why this law must be urgently passed so that the
State could recover its money retroactively," the PM commented.

Corpbank Conservators Deny Accusations

Reacting to Stoyanova's statement, the Corpbank conservators
later in the day issued a statement saying that they work in
keeping with the law and within the powers vested in them. They
denied having disposed of any Corpbank assets, having considered
 any of the assignment applications filed with the bank after
November 6, 2014, when
Corpbank's licence was withdrawn, or any of the takeover
applications submitted to the bank after the legislative
restrictions took effect on November 11.

The conservators further explained that they were in no position
 to dispose of any Corpbank assets because all of them had been
garnished as part of the delicensing procedure and because the
law expressly bans it.

They said in conclusion that they were available for all kinds
of checks by the competent authorities and will offer their full
 cooperation.

Asked by reporters why the revisions are needed once the
Corpbank conservators declared that they had not authorized any
disposition of the bank's assets, Finance Minister Goranov
pointed out that conservatorship is not a form of safeguarding
the assets of a failed bank but a form of temporary management
of the bank. "This has long ceased to be a bank because the BNB
supervisory body has determined that Corpbank is no longer a
bank," he said. In his words, the problem lies in a legal
loophole about the way of handling the bank during the period
between delicensing and bankruptcy, because the judgment of the
court has taken too long.