site.btaParliament Rejects Proposal to Require Bulgarian National Bank to Rehabilitate Banks Whose Capital Is Negative

111 ECONOMY-CORPBANK-DISCUSSION amplified 3

Parliament Rejects Proposal to Require
Bulgarian National Bank to Rehabilitate Banks
Whose Capital Is Negative


Sofia, October 31 (BTA) - Parliament on Friday voted 151-0, with
7 abstentions, to reject one of four points in a draft decision
proposed by the Ad Hoc Committee on Budget and Finance, which
would give Parliament until November 6 to amend the Credit
Institutions Act in order to require the Bulgarian National Bank
(BNB) to propose actions to rehabilitate any banks whose own
capital has become negative.

The proposed four-point decision, provisionally approved by the
Budget and Finance Committee on October 29, was aimed to scrap
the rule for automatic bankruptcy of a bank that lacks capital
adequacy. It also sought to give Parliament until November 6 to
adopt legislative amendments making it possible to pay out
guaranteed deposits in line with EU legislation, as well as to
revise the Credit Institutions Act to require the BNB to take
action for strengthening banks when their own funds become
negative.

After a whole day of debates on the BNB report about the
Corporate Commercial Bank (Corpbank) and its subsidiary Victoria
Commercial Bank, the lawmakers resolved that Parliament should
adopt legislative changes to ensure that guaranteed bank
deposits will be paid out immediately under the conditions
defined by EU law.

The legislature also decided that the Council of Ministers, the
Financial Supervision Commission and BNB should propose
amendments to banking legislation, including the BNB Act, the
Credit Institutions Act and the Bank Deposit Guarantee Act.

In order to provide more effective protection to depositors,
Parliament recommended to BNB to hire an international agency to
track Corpbank's shareholders and administrators and any
persons connected with them.

The legislature dismissed an alternative proposal made by the
Bulgarian Socialist Party - Left Bulgaria Coalition, which
insisted that the MPs should adopt BNB's report for their own
information and express their disapproval of the performance of
the BNB Governing Council in supervising Corpbank.

Budget and Finance Committee Chairwoman Menda Stoyanova said she
believes that Friday's parliamentary decisions can give
Corpbank's depositors a chance to get their money by the end of
November.

The Caretaker Minister of Finance, Roumen Porozhanov, expects
that the government will face lawsuits in connection with
Corpbank. Porozhanov said that an authentication of the Corpbank
audit will help the government in these lawsuits. He proposed
that the Budget and Finance Committee should discuss the effects
of the planned measures at a closed-door meeting next week.

Earlier in the day, the parliamentary group of the GERB party
decided to move for dropping the controversial point in the
four-point decision. The news was announced by Budget and
Finance Committee Chairwoman Menda Stoyanova after a meeting of
GERB's parliamentary group.

Stoyanova said that the change in GERB's position about the
legal amendment came after BNB Governor Ivan Iskrov presented in
Parliament a proposal to rehabilitate Corpbank coming from a
potential investor. "The proposal showed clearly that the
investor's intention was not sound. They want the bank's
rehabilitation, and set requirements to the State to this
effect, without having sufficient such requirements towards
themselves," Stoyanova said.

She said that the proposal whereby Parliament would have until
November 6 to adopt legislative amendments making it possible to
pay out guaranteed deposits in line with EU legislation, still
remains.

In a statement in Parliament, GERB leader Boyko Borissov agreed
with arguments against the decision voiced by Volen Siderov
(Ataka), Roumen Gechev (Bulgarian Socialist Party - Left
Bulgaria), and Martin Dimitrov (Reformist Bloc). BNB Governor
Ivan Iskrov also took a stand against a proposal of three of the
investors in the bank to rehabilitate it with the aid of the
State. Iskrov justified his position saying that the
rehabilitation according to this plan will cost more public
money than declaring the bank insolvent.

Borissov described the investors' proposal presented by Iskrov
as "a mean little note" and said that giving additional time
during which depositors in Corpbank with deposits above the
guaranteed minimum could obtain their money is "a waste of
time".

Borissov blamed the BNB leadership for the current situation and
the lost time. "We had the best intentions to try and save
Corpbank and waited for Iskrov to present the central bank's
report on the matter," Borissov said. Speaking to reporters in
Parliament, Borissov later said that the report showed that
Corpbank was not in a difficult but very difficult state and
that in practice it cannot be rehabilitated. Borissov voiced a
hope that Iskrov would tender his resignation "any time now".

The opponents of the proposed amendment argue that it provides
security to bankers so no matter what they do, the taxpayer will
ultimately foot the bill.

MPs from the BSP-Left Bulgaria coalition reconfirmed they were
against rehabilitating Corpbank with public money and urged for
applying the Credit Institutions Act as it is. The socialist MPs
voiced surprise with the information about "investors hovering
above Sofia". MP Gechev said that an investor who will invest
500 leva in order to save 5 leva does not exist. "If someone
wants to give more time for illicit operations, let them say
so," he said.

The parliamentary group of the Movement for Rights and Freedoms
holds that depositors should be given prompt access to their
guaranteed deposits, said the party's Yordan Tsonev. "We suspect
that the current director of the Bulgarian Deposit Insurance
Fund is linked to an economic circle which has its own
representatives in the Bulgarian Parliament," Tsonev said. "You
will see who wanted to have Corpbank go bankrupt and who
organized the relevant protest," he said, apparently referring
to an upcoming demonstration on Friday evening against the
pumping of public money into Corpbank.

Ivailo Kalfin of the ABV Movement said it was unacceptable to
use money from the budget to save Corpbank.

MPs from the Reformist Bloc too took a stand against pouring
public money in Corpbank. According to MP Dimitrov, the cheapest
solution for the public would be for the State to provide a
guarantee for a loan taken out by the Bulgarian Deposit
Insurance Fund. In his words, this will mean no movement of
money and no increase of the budget deficit.

Emil Dimitrov of the Patriotic Front said that if there was even
a small chance for letting the bank operate, it should be used,
so that the legal amendments should be passed.