Parliament Conclusively Amends Bank Bankruptcy Act

Parliament Conclusively Amends Bank Bankruptcy Act

Sofia, February 9 (BTA) - On Friday, the National Assembly passed conclusively amendments to the Bank Bankruptcy Act, moved by three MPs of the Movement for Rights and Freedoms: Delyan Peevski, Yordan Tsonev and Hamid Hamid and prompted by the Corpbank failure.

Under the law, any striking of collaterals will be declared null if done after the bank is placed under special supervision and until the monetization of its assets commences. Any transactions whereby a bank' debtors transfer participating interests or shares after the bank is placed under special supervision will be invalid.

Corpbank will have to renew each collateral for a new period within six months from the entry into force of the amendments.

Official receivers and trustees in bankruptcy will be prohibited from striking any collaterals instituted by debtors in favour of a bankrupt bank until the monetization of its assets commences (except where the bank's receivable has been fully extinguished by cash payment), the legislature resolved.

Any transaction whereby a receivable originating from the bank has been transferred to a third party will be invalid in respect of the bank and the bankruptcy creditors if this transaction has not resulted in the accrual to the patrimony of the disposer of the receivable, within reasonable time, of cash or assets other than a price payable on a transaction which is commensurate to the receivable transferred.

In case the transaction is declared invalid by the court, the third party will forfeit his capacity as creditor of other parties if his receivable is based on rights acquired as a result of this transaction.

The trustee in bankruptcy, the official receiver or the Bulgarian Deposit Insurance Fund may bring actions before the bankruptcy court for the declaration of invalidity of a transaction or a series of transactions within five years after the initiation of the bankruptcy proceedings against the bank.

The provisions concerning set-offs will apply as from June 20, 2014, which is the official date of Corpbank's bankruptcy.

The Credit Institutions Act was amended as well, forbidding conservators to strike collaterals instituted by debtors.

Corpbank, then Bulgaria's fourth biggest lender, suspended all operations on June 21, 2014 after a run by depositors left it illiquid. The Bulgarian National Bank (BNB) Governing Council withdrew Corpbank's banking licence, effective November 6, 2014. The court declared the bank bankrupt on April 22, 2015. Its insolvency date was set at June 21, 2014. The bank's majority shareholder Tzvetan Vassilev and several former Corpbank executives are being tried for allegedly embezzling some 2,559 million leva from the bank. Two KPMG auditors and three former senior BNB officials (two ex-deputy governors and heads of the Banking Supervision Department and a head of team) are facing charges of malfeasance for failing to exercise control over Corpbank.

Source: Sofia