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The Bulgarian experience: Payout of the fourth largest bank Borislav Stratev Bulgarian Deposit Insurance Fund 1 World Bank FinSAC-BFG High-level Seminar.

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Presentation on theme: "The Bulgarian experience: Payout of the fourth largest bank Borislav Stratev Bulgarian Deposit Insurance Fund 1 World Bank FinSAC-BFG High-level Seminar."— Presentation transcript:

1 The Bulgarian experience: Payout of the fourth largest bank Borislav Stratev Bulgarian Deposit Insurance Fund 1 World Bank FinSAC-BFG High-level Seminar on Challenges for European DISs Warsaw, 26 February 2015

2 Contents 2 Background information KTB license revocation Liquidity and financing the payout Terms and procedure for payout Coordination with KTB conservators Coordination with agent banks BDIF, conservators and agent banks Depositors reimbursement Difficulties in the payout BDIF communication campaign Efficient payout

3 Background Information 3 Corporate Commercial Bank (KTB) – fourth largest bank in Bulgaria end-March 2014: –assets: EUR 3.733 bln –8.44% of banking system assets –9.44% of GDP –220,000 depositors

4 Background Information – cont. 4 June 2014 – run on the bank; due to lack of liquidity after the run KTB management requested from Bulgarian National Bank (BNB) to be placed under special supervision 20 June 2014 - BNB placed KTB under special supervision, initially for 3 months With its act BNB suspended all KTB’s obligations, restricted the bank’s activities, dismissed the management, divested shareholders of their rights and appointed conservators 16 Sept 2014 – BNB prolonged the special supervision by another 2 months till 20 Nov (max 6-month period of special supervision under Credit Institutions Act)

5 Background Information – cont. 5 KTB depositors had no access to their deposits during the whole period of special supervision BDIF has not been triggered as under Bank Deposit Guarantee Act, the only payout trigger is license revocation Political crisis: resignation of the Government in end of July, dissolved Parliament as of early August, Caretaker Government appointed and general elections held on 5 Oct 2014, new Parliament as of 27 Oct and new government as of 7 Nov 2014 No serious plans for KTB’s recapitalization and restructuring were submitted to BNB by KTB’s shareholders or other private investors

6 KTB License Revocation 6 6 Nov 2014 – BNB revoked KTB license due to insolvency => BDIF triggered for the payout of insured deposits’ amounts Because of ongoing license revocation challenge bank bankruptcy proceedings have not been opened yet

7 Liquidity and Financing the Payout 7 Covered deposits with KTB – EUR 1.9 bln BDIF own funds as of 6 Nov – EUR 1.07, incl. EUR 300 mln in government bonds Government loan up to EUR 1 bln extended to BDIF prior to payout start of KTB depositors Reverse repo agreements signed between BDIF and selected banks

8 Terms and Procedure for Payout 8 6 Nov - BDIF informed KTB depositors about the initial day of reimbursement – 4 Dec 2014 Payout to be carried out by agent banks designated by BDIF Depositors to visit their agent bank to be reimbursed Insured KTB depositors - Bulgarian and foreign physical persons and legal entities, are repaid up to EUR 100,000 for each KTB depositor Guaranteed amount includes principal and interest accrued as at the date of KTB’s license revocation Foreign currency deposits are repaid in BGN (levs) at the BNB exchange rate applicable at the initial day of payout No statutory requirement depositors to submit claims to BDIF Depositors may dispose with their guaranteed amounts within 5 years as of 4 Dec 2014

9 Coordination with KTB Conservators 9 Preparatory work –BDIF issued guidelines for the format and content of information (files) about KTB customers –Several tests with regard to the structure and content of customers’ database during KTB conservatorship. Deficiencies repaired in time –After KTB license revocation BDIF received preliminary customers information within 3 days Repayment –Final information on covered deposits submitted to BDIF in the evening before the payout commencement

10 Coordination with Agent Banks 10 Preparatory work –Selection of agent banks in compliance with approved by BDIF Board selection criteria, the main: at least 70% of KTB network to be covered by agent bank network –Tests with agent banks –Distribution of depositors across agent banks: as per last digit of their uniform civil number for individuals/unified identification code for legal entities –BDIF current account opened with each agent bank Repayment –Verified by BDIF information on covered deposits submitted to agent banks –BDIF receives daily information on depositors reimbursement

11 BDIF – KTB Conservators – Agent Banks 11 Tripartite agreement between BDIF, agent banks and conservators Samples of documents: declaration, power of attorney, complaints Uniform terms and tariff for payout transactions Information transferred via VPN secure BNB channel Complaints in case of objection of repayable amount or exclusion from depositors’ list are addressed to conservators Close coordination among the parties

12 Depositors Reimbursement 12 Payout commenced on 4 Dec 2014 via 1,500 branches of nine banks At the agent bank, depositors can: –open account with agent bank and place their money therein; or/and –order a transfer to another bank; or/and –withdraw their sum in cash Declarations signed at the agent bank UCN/UICBank 0DSK Bank 1United Bulgarian Bank 2Eurobank Bulgaria 3Raiffeisenbank (Bulgaria) 4Allianz Bank Bulgaria 5UniCredit Bulbank 6 7Central Cooperative Bank 8CIBANK 9First Investment Bank, where foreign nationals will be serviced as well

13 Depositors Reimbursement – cont. 13

14 Difficulties in the Payout 14 Discrepancies in depositors’ documents with KTB database –new ID card not reported to KTB –changed family name (marriage, divorce) –technical issues - wrong name, wrong ID card number or uniform civil number (individuals), unified identification code (legal entities) Special accounts – notaries, lawyers, bailiffs (enforcement agents) Exceptions from guarantee under BDGA (d eposits with preferential interest rates) Encumbered deposits – depositors objecting their repayable amount Complexity of overall coordination among parties involved (BDIF – KTB conservators – 9 agent banks)

15 BDIF Communication Campaign 15 Traditional communication channels used: –BDIF microsite for KTB depositors –BDIF Call Center –electronic media – TV and radio –print media – major daily newspapers Two sequel spots for KTB depositors, one minute each, broadcasted on the national television and radio BDIF addressed thousands of phone queries and written enquiries PR agency hired for the campaign

16 Efficient Payout 16 Smooth and quick payout –4 Dec - 32% or EUR 570 mln repaid –first 3 days - 55% or EUR 1.04 bln repaid Close cooperation with institutions involved – Ministry of Finance, BNB, Ministry of Interior Close coordination with agent banks and KTB conservators Hard work of BDIF Management and staff

17 State of Play 17 EUR 1.8 bln or 95% repaid to 101,740 depositors since 4 Dec 2014 till 20 February 2015

18 18 Thank you for your attention Borislav Stratev Member of BDIF Management Board T: +359 2 953 1217, E:

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