site.btaDeposit Insurance Fund Will Start Repaying Deposits if Corpbank Is Adjudicated Bankrupt

Deposit Insurance Fund Will Start Repaying Deposits if Corpbank Is Adjudicated Bankrupt

Sofia, October 25 (BTA) - The Bulgarian Deposit Insurance Fund
(BDIF) will start repaying the protected deposits (amounting to
up to 196,000 leva) within the time limit set by the law if
Corpbank is adjudicated bankrupt, the BDIF wrote in a reply
letter sent on Friday to the Chairperson of the European Banking
Authority (EBA) and published on the BDIF Internet site.

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

In its letter to the EBA, the Fund expressed its concern about
the restricted access of depositors to their amounts held in
bank accounts in Corpbank and Commercial Bank Victoria and about
the lack of decision of the competent authority to allow full
or partial access to deposits or to revoke the banking licence.
"Nevertheless, the financial stability system implies
coordinated actions of the responsible institutions in times of
crisis, especially when the fourth largest bank in the country
is concerned," the BDIF writes. It stresses the leading role of
the BNB in dealing with the problem as the only institution in
charge of banking supervision.

The BDIF writes to the EBA that it is ready to fulfill its
mandate with regard to deposit guarantee. For proactive
readiness for payout, should the banking licences of Corpbank
and/or Commercial Bank Victoria be revoked, three tests with
real data on deposits with both banks have been carried out by
the BDIF. Test results were reviewed by the BDIF Management
Board and sent to the BNB and the banks' conservators with a
recommendation for the actions that need to be taken to
supplement the data.

The BDIF portfolio amounts to 2,110 million leva, of which 1,540
million leva are available on the Fund's current accounts with
the BNB, and 570 million are invested in short-term Bulgarian
government securities. Jointly with the Ministry of Finance and
Bulgarian and foreign credit institutions, the BDIF is looking
into various options to finance the shortage of BDIF funds to
repay the guaranteed deposits with Corpbank, which amounts to
approximately 1,700 million leva. The options to fill this
funding gap are placing State-guarantee-backed BDIF bonds in the
local market, contracting a loan from the Bulgarian Government,
or contracting a loan from foreign financial institutions, the
Fund writes.

"Despite the need for borrowing to finance the deficit, the
stability of the deposit guarantee system in Bulgaria will
continue to be maintained," the BDIF writes.

The Fund has held talks to explore the possibilities of the
European Bank for Reconstruction and Development (EBRD)
accommodating it with a stand-by credit line, which will ensure
the BDIF's viability to fulfill its mandate and will enhance
confidence in the deposit guarantee system.

The BDIF points out that a depositor's guaranteed amount with a
bank includes the principal and the interest accrued by the
date of licence revocation. Reimbursement is executed through a
servicing bank designated by the BDIF Management Board. "No
category of depositors take precedence over others," the Fund
points out.

"In view of the large number of depositors and with the aim of
their optimal servicing, the BDIF is working on the option of
parallel repayment via the branch network of several banks. In
order to avoid subjectivity and market distortion, clear and
fair criteria for selection of servicing banks have been
elaborated," the Fund said in its press release.