/ world today news/ On 21.10.2014, the Governing Board of the BNB considered a report on the analysis and assessment of the assets of “Corporate Commercial Bank” AD (KTB), carried out by the audit firms “Ernst & Young Audit” OOD, “Deloitte Bulgaria”. Ltd. and “AFA” Ltd.
In the period 05.08 – 20.10.2014, the mentioned audit firms performed analysis and assessment of main balance sheet items and bank guarantees issued by the bank. The analysis and evaluation performed is based on the principles of recognition and measurement according to the applicable International Financial Reporting Standards (IFRS). The assessment was carried out on the basis of the assets and bank guarantees reported in the bank’s registers as of 06/30/2014, reflecting all significant events up to 09/30/2014 that had an impact on the analysis.
As of September 30, 2014, the total amount of all the bank’s assets is BGN 6,662 thousand. The conclusion of the audit firms is that there is a need for write-downs of the bank’s assets in the total amount of BGN 4,222 million. Detailed information about the bank’s balance sheet and conclusions from the analysis and valuation of assets can be seen here.
On the basis of the bank’s balance sheet and the results of the analysis and assessment of main balance sheet items (including loans, investment portfolio, securities, other assets, real estate) and bank guarantees issued by the bank, the following conclusions can be drawn:
The management of the bank did not adhere to prudent and conservative banking practices. After placing the bank under special supervision, numerous omissions were found that were allowed before it was placed in this status:
– In the process of granting credits, there is a lack of in-depth research of the credit seekers, there are no complete analyzes of business plans and estimates regarding the projects justifying the financing.
– There is a lack of control in the establishment and ongoing monitoring of the negotiated collateral. The analysis carried out shows that a significant part of the guarantees have gaps in their establishment or are non-existent, which makes them unrealizable. The coverage ratio of the bank’s loan portfolio with valid collateral is around 13 percent.
– There is a lack of ongoing monitoring and control over the activities of the borrowers and the targeted use of the funds from the granted loans. Numerous loan renegotiations were allowed without the necessary justifications for this.
– The documentation in the credit files is not maintained in a condition that allows the bank to manage its receivables in order to obtain the economic benefits associated with them.
– In the bank’s activity, vicious business practices unusual for the banking system are observed, which are carried out through complex operations aimed at concealing the essence of deals and transactions. One of the examples of this is the specific way of lending, mediated by “special purpose companies”, holding companies and the like, in order to finance the acquisition of assets, does not correspond to standard and reliable banking practices.
– The financial and supervisory reports submitted by the management of the bank before it was placed under special supervision before the Banking Supervision Department of the BNB were unreliable and misleading.
For the reasons listed above, the BNB is sending the auditors’ reports to the attention of the Sofia City Prosecutor’s Office.
The Management Board of the BNB assigned the conservators to account for the assessments prepared in full compliance with IFRS standards and to submit to the BNB the relevant supervisory reports by 31.10.2014, which are necessary for making the decisions provided for in the Law on Credit Institutions.
Other decisions, including restructuring and/or rehabilitation of the KTB, are possible if the National Assembly, within its legislative powers, finds it appropriate and promptly adopts amendments and additions to the current legislation, including with regard to resource provision.
In order to make an informed decision and support the work of the people’s representatives on the KTB case, the Governing Council of the BNB will submit on 27.10.2014, the first working day of the 43rd National Assembly, summary information on the events and all the decisions taken by the BNB regarding of the KTB group from June 20, 2014 (the day of placement under special supervision of KTB) until now.
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