/View.info/ The recommendations issued by the European Banking Authority (EBA) are not mandatory and legally binding for the competent authority.
This is stated in a message of the Bulgarian National Bank (BNB) from today, which has sent a response to the letter of the chairman of the EBO.
The European banking supervision has asked the BNB to guarantee depositors in KTB and TB “Victoria” access to their deposits. According to the EBO, the BNB and the deposit guarantee fund violate European laws. He called for the payment of the deposits in KTB. The banking authority started an investigation into a possible violation of European regulations by the competent authorities in Bulgaria on September 25.
The BNB states that the purpose of the recommendations is to achieve the imposition of consistent, efficient and effective supervisory practices within the European system of financial supervision and to ensure the general, uniform and consistent application of EU law. The procedure established in Art. 16 and 17 of Regulation (EU) No. 1093/2010, stipulates that in the event of non-implementation of the EBA’s recommendations within the specified terms, the EBA shall notify the EC, which in turn may issue an official statement.
BGNES Agency publishes, without editorial intervention, the BNB’s opinion on the EBA’s Recommendation:
As the BNB has already noted in previous opinions, the definition of “unavailable deposit” according to Article 1, paragraph 3, subparagraph (i) of Directive 94/19/EC on deposit guarantee schemes could not be directly applied, insofar as is unconditional and sufficiently clear and precise, and these conditions, according to the practice of the Court of the EU, determine the possibility of direct application. The definition itself does not confer direct powers on a specific competent authority in a Member State, it only indicates the characteristics of a “non-available deposit”. In accordance with this definition, national legislation should specify a competent authority and its powers, including specific national measures to establish that deposits are unavailable.
As the BNB has already indicated, Directive 94/19/EC establishes minimum harmonization and measures are necessary for its introduction into national legislation, with which to achieve the result intended by the Directive, while observing full compliance with the national legal framework and taking into account the peculiarities of the national legal system.
The establishment of an “unavailable deposit”, according to Article 1, paragraph 3, point (i) of Directive 94/19/EC, should be made by the “relevant competent authority”, which, however, is determined according to national law and has powers exhaustively defined by national legislation.
In this regard, the only power granted to the BNB, according to the national regulations introducing the requirement of Article 1, paragraph 3, subparagraph (i) of Directive 94/19/EC, is to revoke the license of a bank upon finding that the conditions set out in Art. . 36 of the Law on Credit Institutions (LKI), are available. The revocation of a bank’s license is subject to challenge before the Supreme Administrative Court. Any other decision taken by the BNB outside the scope of its statutory competence would be null and void. The BNB does not have the authority, according to the national legislation, to establish that the deposits in a given credit institution are unavailable through any act other than the revocation of the banking license.
The above is also valid for the Bank Deposit Guarantee Fund (FGVB), which can pay the guaranteed amount of deposits under the terms of Article 23 of the Bank Deposit Guarantee Act (BGVB), only when the BNB has revoked the banking license of respective bank and under no other conditions. Moreover, such a decision implies the expenditure of the Fund’s funds for billions of BGN and could not be taken without a clear legal basis in the national legislation.
Each administrative authority should take its decisions and publicize its administrative acts within the scope of its powers established in national law. In the event that it is established that the national law, implementing the relevant EU directive, defines in a narrower sense and does not give the full scope of powers to the relevant competent authority as required by the directive, the national law should be amended.
Article 1(3)(i) of Directive 94/19/EC, which is essentially a definition, should be properly transposed into national law. This provision necessarily requires national legislative measures for its introduction, which correspond to the national legal order and peculiarities. Such measures, as determined by the Bulgarian legislator, constitute the withdrawal of the banking license as a prerequisite for the payment of deposits by the FGVB. There is no other national measure introducing Article 1, paragraph 3, subparagraph (i) of Directive 94/19/EC into Bulgarian legislation.
In addition, placing a bank under special supervision, including suspending the performance of its obligations, is a national supervisory measure applicable under section eight of chapter eleven of the CPI. This measure was imposed through an administrative act, which the BNB adopted in June 2014 in compliance with the legal requirements. It has not been contested before the court, it has entered into force and has given rise to a legal action. According to Art. 115, para. 3 of the Civil Code, this measure can be applied for a maximum period of up to six months. Provided that this term is excessively long compared to the terms for paying out the guaranteed deposits according to Directive 94/19/EC, the national legislation should be amended accordingly.
In the context of the above, the BNB states that, regardless of the fact that the findings regarding the alleged non-compliance with EU law concern the BNB and the FGVB, neither of the two institutions has the competence to amend the national legislation to overcome the non-compliance. Only the Bulgarian Parliament has such powers.
It is also noted that there are no provisions and procedures in the national legislation that authorize the BNB to grant partial access to deposits. As stated above, with the exception of the provision of Art. 23 of the ZGVB, there are no other conditions for the payment of guaranteed deposits according to Bulgarian legislation. There are also no provisions on the basis of which, in the event of insufficient liquid funds in a bank, a partial payment or distribution of these funds will be made. In such circumstances, the Bulgarian legislator has not assigned the BNB competences to allow or deny partial access to deposits in a bank, and any such decision taken by the BNB would be contestable and would create legal uncertainty.
In addition, the BNB has informed the EBO that the assessment and analysis of KTB’s assets, carried out by the audit firms “Deloitte Bulgaria” OOD, “Ernst & Young Audit” OOD and “Afa” OOD, have already been completed. The Management Board of the BNB has tasked the conservators to account for the estimates prepared in full compliance with international financial reporting standards and to submit to the BNB the necessary supervisory reports for decision-making provided for in the Law on Credit Institutions by 31.10.2014.
The BNB informs the EBA of the measures taken so far, which are already underway. BNB indicates that in connection with the procedure opened by the European Commission for violation of Directive 94/19/EC, of which Bulgaria was notified on 26.09.2014, the country expressed a position approved by the Council of Ministers. According to the Commission’s finding that Art. 1, paragraph 3 and Art. 10, paragraph 1, item 1 of Directive 94/19/EC, the opinion is supported with relevant arguments that when transposing the directive, the Bulgarian legislator sought to put in legal form the result sought by the European legal act, taking into account the specific provisions and the spirit of the directive. Nevertheless, it is agreed that there is some inconsistency in the part about having depositors’ access to guaranteed sums as quickly as possible. To eliminate the discrepancy, a draft of a new Law on guaranteeing deposits in banks is being developed. A specific timeline for its adoption is also presented. A commitment has been made in connection with the transposition of the new Directive 2014/59/EU to create a framework for the recovery and restructuring of credit institutions and investment intermediaries by the end of 2014 to substantially change the procedure for placing banks under special supervision under the Law for credit institutions. The new legislation, which is being developed, will take into account the findings of the EBA and the EC.
The BNB expresses its readiness to continue providing its expertise to assist the competent authorities in Bulgaria in the process of legislative changes, so as to ensure full compliance with EU law.
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