site.btaEuropean Banking Authority Notifies Breach of EU Law to Bulgarian Authorities

European Banking Authority Notifies Breach of
EU Law to Bulgarian
Authorities


London/Sofia, October 20 (BTA) - The European Banking Authority
(EBA) has adopted a formal recommendation addressed to the
Bulgarian National Bank (BNB)
and the Bulgarian Deposit Insurance Fund (BDIF) notifying that
they are breaching Article 1(3)(i) and Article 10 of Directive
94/19/EC (the Deposit Guarantee Schemes Directive - DGSD). The
EBA also informs the two national authorities of the actions
that they need to follow in order to comply with their
obligations under EU legislation.

In the recommendation issued on Monday, the EBA formally
requests that the BNB ensures that depositors of Corporate
Commercial Bank AD (Corpbank) and Commercial Bank Victoria EAD
(VCB) have access to deposits protected under
the DGS Directive by October 21, 2014.

The EBA explains that after the formal investigation opened at
the end of last month into the measures taken by the BNB in the
conservatorship of the two banks, all the requirements for
triggering the DGS Directive were found to have been met. This
is the EU Directive prescribing that depositors should be
compensated no later than 25 working days after the
unavailability of deposits.

The EBA tells the BNB that it should either remove the
limitations to access to deposits resulting from its supervisory
actions in placing Corpbank and VBC in conservatorship, or it
should immediately trigger pay-outs of due and verified claims
by the BDIF. The Authority further clarifies that if the BNB
fails to take one of these two necessary actions, then the BDIF
should pay out due and verified claims.

In particular, the EBA expresses concern about the length of
time that it is taking to establish the financial situation of
both Corpbank and VCB and the impact that this is having on
resolving the situation for depositors and other creditors in
Bulgaria
and beyond. The EBA asks that the BNB accelerate the ongoing
audit process in order to provide certainty for depositors as
rapidly as possible.

National authorities are required to take all appropriate
measures to ensure the fulfilment of obligations under EU
legislation and to interpret national law in light of EU
legislation. The DGS Directive aims at ensuring depositor
protection for deposits up to 100,000 euro: where a competent
authority has become aware that due and payable deposits are
unavailable, it is required to determine within 5 working days
whether there is any prospect of deposits being repaid or
whether pay-outs by the national deposit guarantee schemes (DGS)
need to be triggered. If the DGS is triggered, deposits should
then be released within 20 working days.

The BNB placed Corpbank and VCB under conservatorship and
suspended all payments on June 20 and 22, 2014, respectively.
Both banks have been closed since then and during this period
depositors have not had any access to their funds either through
their banks or through the DGS.

Following a stage of preliminary enquiries in September, the EBA
had opened a formal investigation into an alleged breach of EU
law by Bulgarian competent authorities. The issuance of Monday's
recommendation is a distinct procedure to
the infringement proceedings launched on September 25 by the
European Commission. While the Commission's action aims at the
correct transposition of EU law into Bulgarian law, the EBA's
recommendation aims at the compliance with Union law by the
national supervisor and deposit guarantee scheme.