KTB’s case – chain of events

KTB’s case is unquestionably a scandalous fraud of an unprecedented scale. A fraud that remained unnoticed for many years by the state regulators (i.e. the Bulgarian National Bank and the Financial Supervision Commission). One tenth of Bulgaria’s GDP was devoured by the black hole of KTB. KTB’s bankruptcy shall affect thousands of individual depositors, companies and public organizations for a number of years to come.

Corporate Commercial Bank AD (known also as “KTB” for its Bulgarian abbreviation) used to be one of the largest Bulgarian banks: 4th in terms of assets, 3rd in terms of net profit and 1st in terms of deposit growth. Until June 2014. Following a run on the Bank in June 2014 KTB was closed and a few months later its license revoked. According to the simultaneous audit procedures on KTB’s assets performed in parallel by three audit firms, retained by the Bulgarian National Bank, KTB’s assets of over BGN 6.5 billion had to be impaired by the shocking BGN 4.2 billion. In plain language this meant that according to the audit firms BGN 4.2 billion of KTB’s assets were hardly recoverable.

Our publications follow KTB’s case and are aimed at helping our clients (and anyone else who is interested) follow and understand the development and legal aspects of KTB’s insolvency proceedings.

June 20, 2014

Corporate Commercial Bank is placed under conservatorship for 3 months


Due to massive withdrawals the Bulgarian National Bank (BNB) places Corparate Commercial Bank (CCB) under special supervision (conservatorship) for a period of 3 months. CCB’s operations are suspended.

The other actions undertaken by BNB are the following:

  • The members of the Board of the Directors of CCB are removed from their positions;
  • The members of the Supervisory Board of CCB are removed from their positions;
  • For a term of 3 month BNB suspends the voting rights of CCB shareholders, holding more that 10% of CCB’s share capital.
  • Three audit firms (i.e. Deloitte Audit OOD, Ernst & Young Audit OOD and AFA OOD) are retained to carry out agreed-upon procedures on CCB’s assets;
  • Questors are appointed.

June 25, 2014

Bulgarian National Bank assigns to audit firms the performance of preliminary agreed-upon procedures on Corporate Commercial Bank’s assets


On 25 June the Bulgarian National Bank (BNB) assigns to Deloitte Audit OOD, Ernst & Young Audit OOD and AFA OOD the performance of preliminary agreed-upon procedures on CCB’s assets. The purpose of the procedure is for BNB to obtain an assessment of the status and quality of CCB’s credit and investment portfolio as well as a limited analysis of CCB’s liabilities.

June 30, 2014

Bulgarian National Bank announces reduction of interest rates on Corporate Commercial Bank deposits


The Bulgarian National Bank (BNB) reduces effectively as of 01 July 2014 the interest rates on deposits in Corporate Commercial (CCB) Bank to their average market levels for the banking system by types, maturity and currencies, all calculated in accordance with BNB’s interest statistics for the interest rates on deposits up to May 2014.The same action is applied to CCB’s subsidiary “Credit Agricole Bulgaria” EAD (renamed as Bank Victoria).

July 11, 2014

Announcement of findings of preliminary agreed-upon procedures on Corporate Commercial Bank assets


The Bulgarian National Bank announces publicly the results of the preliminary agreed-upon procedures on CCB’s assets. According to the auditors’ reports substantial information concerning credits file of 3.5 billion is believed to be missing or is insufficient. Due to insufficient information the auditors are not in a position to comment on the concrete amount of necessary impairment of these assets.

July 31, 2014

Evaluation of Corporate Commercial Bank’s assets


The Bulgarian National Bank mandates CCB’s questors to enter into new agreements with the three audit companies for the performance of an overall evaluation of CCB’s assets. The agreed-upon procedures are to be completed until 20 October 2014.

September 16, 2014

Bulgarian National Bank prolonges the period of conservatorship over Corporate Commercial Bank


The Bulgarian National Bank extends the conservatorship period over Corporate Commercial Bank until 20 November 2014.

October 20, 2014

Issuance of auditors’s reports


As at 30 September 2014 Corporate Commercial Bank’s assets amount to BGN 6.662 million. According to the conclusions of the agreed-upon procedures carried out by the three audit firms, CCB’s assets are to be impaired by BGN 4.222 million. The impairment loss resulted in CCB’s having negative equity of minus BGN 3.745 million. Thus CCB fails to meet the share capital requirement pursuant to Art. 92 of EU Regulation № 575/2013.

November 6, 2014

Bulgarian National Bank revokes Corporate Commercial Bank’s licence


November 7, 2014

Bulgarian National Bank files with the Sofia City Court a claim for opening of insolvency proceedings in respect of Corporate Commercial Bank


November 10, 2014

Sofia City Court opens case No 7549/2014 concerning Corporate Commercial Bank insolvency


November 12, 2014

The Bulgarian Deposit Insurance Fund announces the scope of deposit guarantee


The Bulgarian deposit insurance fund (BDIF) announces that the following deposit products with Corporate Commercial Ban (CCB) are guaranteed by BDIF:

  • Preferential demand deposit;
  • Demand deposit ‘Plus';
  • ‘Term deposit 4×4′;
  • ‘Demand deposit ‘Eurolev';
  • ‘Standard term deposit’ and
  • ‘Preferential deposit’ with deposit certificate (nominal).

November 21, 2014

Request for stop of court proceedings


The General Investment Fund of Oman, owning 30.21% of CCB’s share capital through the Luxembourg vehicle Bulgarian Acquisition Company II Sarl, has filed a request for the insolvency proceeding to be stopped.

The request is motivated with the circumstance that Bromak EOOD (i.e. CCB’s biggest shareholder, owning 46.05% % of the share capital) has appeal before the Supreme Administrative Court BNB’s resolution of 6th November 2014 for the revocation of CCB’s license. Bromak EOOD is a limited liability company, entirely owned by Tsvetan Vasilev.

November 24, 2014

First court hearing – stop of court proceedings


The City Court of Sofia has stopped the CCB’s insolvency proceedings until SAC decree its resolution about the appeal of BNB’s resolution for revocation of CCB’s license.

December 4, 2014

Initial date for repayment of guaranteed deposits


The Bulgarian Deposit Insurance Fund (BDIF) informes that the guaranteed deposit shall be repaid starting from 4 December 2014. As of that date the guaranteed depositors with Corporate Commercial Bank will have access to the full amount of their reimbursable sum. BDIF repays in full guaranteed deposit amounts of Bulgarian and foreign physical persons and legal entities up to BGN 196,000 (EUR 100,000) for a depositor, regardless of the number of his/her accounts with CCB. The guaranteed sum includes the principal and the interest accrued as of the date of license revocation. Deposits in foreign currency are repaid in BGN recalculated as of the initial day of payout. Repayments will be carried out by servicing banks, designated by BDIF. The depositors shall report in person at their designated servicing bank, where they have to present an ID (for natural persons) in order to dispose of their funds. Depositors may withdraw their money in cash, order a transfer to another bank, or place it in an account with the servicing bank. There is no statutory requirement, and hence no need for depositors, to submit an application to BDIF or the servicing bank in order to receive their reimbursable amounts. Guaranteed depositors will have the right to be repaid within the statutory deadline of 5 years as of 04 December 2014.

January 13, 2015

Appeal of CCB license revocation by CCB shareholders


The shareholders of CCB have appealed before the Supreme Administrative Court (3 panel jury) Resolution 138/06.11.2014 of Bulgarian National Bank for the revocation of CCB’s license (administrative case 14782/2014).

The Supreme Administrative Court, however, has held that the shareholders’ appeal of BNB resolution for revocation of CCB’s license is inadmissible and therefore has terminated the proceedings (Ruling 363 of 13 January 2015).
The shareholders have appealed the Ruling of the 3 panel jury before a 5 panel jury of the Supreme Administrative Court.

April 22, 2015

Sofia City Court declares CCB insolvent/bankrupt


The first instance court (i.e. the Sofia City Court) declares CCB insolvent. According to the Court the initial date of CCB insolvency is 6 November 2014, which date coincides with the date of revocation of CCB license. The insolvency proceedings of CCB commence.