November 2014 - On 6 November 2014 the Bulgarian National Bank announced that it withdraws the banking license of the Bulgarian Corporate Commercial Bank AD (“CCB”). As a next step an application for initiation of insolvency proceedings shall be filed with the competent Bulgarian court and a receiver shall be appointed.

At the end of June 2014 CCB and its wholly-owned subsidiary Commercial Bank Victoria EAD were placed under a conservatorship regime due to the depletion of CCB’s liquid assets. Since that time, depositors in both banks have been prohibited from withdrawing their deposits.  Under the current Bulgarian Bank Deposits Guarantee Act depositors are entitled to receive the guaranteed portions of their deposits only after the Bulgarian National Bank has announced the bankruptcy of the respective bank and has revoked its license. Following the withdrawal of CCB’s license on 6 November, it is expected that customers shall be in a position to receive the guaranteed minimum amounts within a 20-day term.

At the end of September 2014 the European Commission initiated an infringement procedure against Bulgaria in connection with the CCB situation, alleging in particular that Bulgaria has failed to properly implement Directive 94/19/EC of the European Parliament and of the Council of 30 May 1994 on deposit-guarantee schemes (the “Directive”). The provisions of the Bulgarian Bank Deposits Guarantee Act are not in line with the rules set out in the Directive whereby the European legislator has explicitly provided for payment of all due and payable deposits to customers within 20 days of the time when the supervising authority establishes that the particular bank is objectively in a situation where it is unable to pay its customers” deposits and there is no prospect that it would be able to do so within a reasonable time. Further, the European Commission considers that the CCB situation represents an unjustified and disproportionate restriction to the freedom of free movement of capital.

The European Banking Authority has also investigated the case and issued a Recommendation to the Bulgarian National Bank and the Bulgarian Deposit Insurance Fund informing them that all required measures must be adopted to ensure that depositors can withdraw their deposits not later than 21 October 2014.

However, Bulgarian authorities argue that under the present legislative framework such payment of monies under deposits is not possible and as a result the Bulgarian Ministry of Finance is currently working on a draft law amending the Bank Deposits Guarantee Act which is expected to provide for the possibility the guaranteed amounts for all due and payable deposits be paid within the terms and under the conditions prescribed by the Directive. Once the draft law is approved by the European Commission it would be lodged with the National Assembly for priority review.

In addition, on the very first working day of the newly elected Bulgarian National Assembly, a bill amending the Credit Institutions Act (“Draft Law”) was submitted. The Draft Law introduces certain exceptions to the banking secrecy rules in cases when a bank is to be restructured or its license is to be revoked, which would allow:

  • revealing information that is subject to bank secrecy relating to deposits and credits of persons who are required to declare their assets under the Publicity of Assets of People Holding Senior State and Other Positions Act (such as the President, Vice-President, MPs, Prime Minister, Judges from Supreme Courts, etc.);
  • revealing information regarding ultimate beneficial owners of offshore companies zones which have deposits or are credited by the respective bank;
  • revealing information about natural and legal persons that have not duly repaid their credits or whose credits are overdue.

The Draft Law is currently being reviewed within the Commissions of the National Assembly and is expected to be discussed at first reading in near future.