EBA notifies breach of EU law to Bulgarian authorities

20 October 2014

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 today, the EBA has formally requested that the Bulgarian National Bank (BNB) ensures that depositors of Corporate Commercial Bank AD (KTB) and Commercial Bank Victoria EAD (VCB) have access to deposits protected under the Deposit Guarantee Schemes Directive (DGS Directive) by 21 October 2014.
The Authority explained 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 told the BNB that it should either remove the limitations to access to deposits resulting from its supervisory actions in placing KTB and VBC in conservatorship, or it should immediately trigger pay-outs of due and verified claims by the Bulgarian Deposit Insurance Fund (BDIF). The EBA further clarified 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 expressed concern about the length of time that it is taking to establish the financial situation of both KTB and VCB and the impact that this is having on resolving the situation for depositors and other creditors in Bulgaria and beyond. The EBA asked 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 EUR: 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.

Note to the editors

The BNB placed KTB and VCB under conservatorship and suspended all payments on 20 and 22 June 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 Union law by Bulgarian competent authorities: https://eba.europa.eu/-/eba-investigates-possible-breach-of-eu-law-in-bulgaria
The issuance of this Recommendation is a distinct procedure to the infringement proceedings launched on 25 September 2014 by the European Commission. While the Commission's action aims at the correct transposition of Union law into Bulgarian law, the EBA's recommendation aims at the compliance with Union law by the national supervisor and deposit guarantee scheme.

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