site.btaBulgaria Has Enough Time to Align Laws to EU Deposits Guarantee Directive - Experts
Bulgaria Has Enough Time to Align Laws to EU Deposits Guarantee Directive - Experts
Sofia, September 26 (BTA) - Experts believe that the country has
enough time to adopt amendments to the national legislation, so
as to avoid an infringement procedure over the case with the
troubled Corporate Commercial Bank (Corpbank). Тhe experts were
approached for comment by BTA a day after the EC announced
opening infringement proceedings against Bulgaria for its
failure to correctly transpose Articles 1(3) and 10(1) of
Directive 94/19/EC, the Deposit Guarantee Scheme (DGS)
Directive, as well as its failure to comply with the principle
of free movement of capital in the case of the troubled
Corpbank.
The Bulgarian deposit guarantee scheme is currently not paying
out on claims by depositors of Corpbank and Commercial Bank
Victoria within the timeline foreseen in the DGS Directive.
Under the national legislation, depositors will have access to
the guaranteed amount of their deposits only after the bank's
insolvency is established and Sofia has told Brussels that
immediate payout of the guaranteed deposits in Corpbank might
torpedo the bank recovery efforts.
According to Prof. Hristina Voucheva, financier and lecturer at
the University of National and World Economy, the Commission
statement is a part of a standard procedure clarifying the case
with Corbank and does not imply the launching of an infringement
procedure against Bulgaria. "The European Commission requests
transposition of the directive in the Bulgarian legislation.
Yet, the European directives are not automatically transferred
into the national legislation: the provisions are transposed in
the Bulgarian laws at the country's discretion," he added.
Voucheva noted, however, that the adoption of legislative
changes is the least problem. The Corpbank problem should find a
general solution. The previous incumbents, together with the
Bulgarian National Bank (BNB), could have settled it only a few
days after its occurrence but that time was wasted and now other
measures and solutions should be sought, Prof. Voucheva
commented. She noted that there should be working Parliament and
Government so that these could be implemented.
Economist Georgi Angelov of the Open Society Institute commented
before BTA that the exchange of correspondence between Bulgaria
and the European Commission will take at least two months
before an infringement procedure is launched provided that the
country does not fulfill the European requirements. There will
be certainly new parliament and government until then that
should amend the Credit Institutions Act, he added.
"It is difficult to predict what would happen with Corbank
because the previous Parliament rejected all possible options:
payment of the guaranteed deposits, dividing the good and the
bad assets of the bank or, generally speaking, it refused to
deal with this matter," said Angelov. "We do not know how the
new Parliament would react but the most important question is
how large the gap in the capital is. If it is medium, it would
be easy to fill it. Yet, if it is so big that it has "eaten up"
all possible rescue measures, then the logical solution would be
to close the bank," Angelov predicated.
The experts recalled that full information about a small part of
the credits was collected by September 15, when the first
report of the Corpbank conservators was published on the BNB
website. "The work continues but, obviously, part of the
borrowers would not give information about their credits,"
Angelov commented. In his opinion, this gives rise to additional
problems because proceedings are to be instituted and
guarantees - called. Citizens deposits will certainly be paid
and the question is not "if" but "when", the economist said
adding, however, that the fate of the other deposits of over
100,000 euro is not yet clear.
According to Angelov, even if Corbank is declared bankrupt, this
would hardly jeopardize the Bulgarian banking system. "Enough
time has passed and it has become clear that Corpbank has not
contaminated the other banks. Consideration should rather be
given to the effect on economy because there are good borrowers
and depositors in Corpbank that operate in large sectors,"
Angelov said.
Luchezar Bogdanov of Industry Watch commented that so far the
European Commission has not levelled criticism at the Bulgarian
banking legislation.
Bogdanov said he does not expect problems with the payment of
the guaranteed deposits by the Deposits Guarantee Fund. He said
that the Fund may draw a state-guaranteed loan but that this
would raise the limit of the public debt.
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