© Diary
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It has long been known that the Bulgarian Development Bank (BDB) is largely not exactly what it was created for. The government has so far turned away from this circumstance with one small exception – a demonstration in the midst of the pandemic, in which Prime Minister Boyko Borissov fired Stoyan Mavrodiev, the bank’s chief executive officer. Now, for the first time, a minister says what is already known from media reports that the bank serves partners of the previous government and takes to change the vicious model of governance of the state bank: on Sunday the caretaker Minister of Economy Kiril Petkov announcedthat it will make an inspection, change the Supervisory Board and change the Articles of Association so that the loans go where they belong – to small and medium-sized companies.
On Monday afternoon (May 17) it was understood, his the state through the ministry is already 100% owner of the bank and the minister in charge can make the planned changes. They plan to start by the end of the week work and commission for transparency and control of public funds in BDB, which will measure the procedures under which loans are granted and in particular all loans over BGN 1 million.
And Peevski, Domuschiev, Samuilov and Gaitanski enter the Development Bank
The institution was established in 1999 as an Encouragement Bank. Its task is to support mainly small businesses. It is 99.9% owned by the state, DSK Bank owns 8 shares. From the statements of Minister Petkov it became clear that the private bank has long sent a letter asking to donate its share to the state, but so far no attention has been paid to it. Fatk, which has already been changed and on Monday the donation was accepted. In addition, the Ministry of Economy announced and officially, which are the eight companies to which a total of over BGN 1 billion in loans have been distributed:
Loans amounting to over BGN 140 million with a ceiling of BGN 150 million have:
Roadway Construction AD (associated with Rumen Gaitanski – Wolf)
Sunny Day AD (until 2019 owned by Georgi Gergov, then the property is associated with Delyan Peevski)
“Blagoevgrad- BT” AD (connected with Delyan Peevski)
Loans amounting to over BGN 115 million:
Market Investment AD (Technomarket) (connected with Delyan Peevski)
International Investments EAD (connected with Delyan Peevski)
Loans amounting to over BGN 60 million
BMF Shipping AD (to the brothers Kiril and Georgi Domuschievi)
Transpect AD (a company created to buy and refinance the troubled bus carrier Union Ivkoni and part of “Stage Address”)
Insa Oil EOOD (Georgi Samuilov’s oil company)
But how did you get here?
Bank for the little ones
At the same time, according to the business card on the bank’s website – “BDB’s vision is to develop a diverse and viable financial market for small and medium-sized enterprises, to create a wide choice of financial products and instruments when the market does not offer enough, to be a business partner and to finance, support and advise the growth of small and medium enterprises. medium-sized enterprises, mobilizing public and private resources wisely and effectively“. In other countries, there are also banks that, using government guarantees, finance companies in sectors in which commercial banks have no interest or in which the risk is too high, as well as in those in which the state wants to achieve a certain effect, not related to the market, but to education, social sphere, ecology, etc.
Traditionally, such banks work by allocating targeted resources to commercial banks and they, in turn, lend to businesses according to established criteria. This is how Encouragement Bank has been working since the beginning, as these rules were introduced even then, as well as not to interfere in the retail market, where the players are commercial banks, so that there is no competition. Such rules are enshrined in the first law on its operation, adopted in 2008.
And so until the end of the rule of the so-called Triple Coalition. The then Minister of Finance Plamen Oresharski increased its capital with the budget surplus. He himself has been under the supervision of the bank since its founding, when he was Deputy Minister of Finance, reminds “Capital”. This raises significant resources that each new management in each new government has as the bank begins to lend large loans directly to companies.
Over the years, the department has had different principals and the last change in this line was in 2017, when it was transferred from the Ministry of Finance to the Ministry of Economy. Shortly afterwards, Mavrodiev took over the post of CEO, which he created himself. Prior to that, the bank was always managed by two equal executive directors. The post was abolished only in the autumn of last year.
What is really happening
In the difficult situation last spring, in which Borissov wondered how to explain the restrictions imposed by the coronavrisua and was not quite sure what help to offer the affected businesses and people, overstrain unlocked another strange loan given by BDB. This overflowed the glass and Borisov fired Mavrodiev from the TV screen after a BGN 75 million loan was granted in the middle of the pandemic to a company related to the collection company SG Group instead of helping the victims of the virus crisis.
“Capital” recalls that even before Mavrodiev headed the bank, it supported businessmen close to the government, but under his command is completed as a personal “treasury of the oligarchs” and the MRF.
Proof of the latter is that one third of its loan portfolio is in only a few large companies related to former MP Delyan Peevski (Technomarket, Bulgartabac, Sunny Day) and Ahmed Dogan Rumen, close to the honorary leader of the movement. Gaitanski-Wolf (“Roadway Construction”).
Mavrodiev’s appointment is key to the bank’s management because he replaces people in key positions for a short time, changes lending rules by removing the limit of up to 10% of the bank’s capital from lending, and circumvents the ban on financing politicians. Thus, the concentration of loans to large companies increases.
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Mavrodiev is a former offshore lawyer, then co-founder of GERB, as a result of which he headed the Financial Supervision Commission for 6 years, which led to a series of scandals, the biggest of which was the unexercised control over the later bankrupt Corporate Commercial Bank as a public company.
By 2019, BDB’s loan portfolio for direct loans exceeds BGN 1.5 billion, and more than half of the amount goes to the largest 10-15 borrowers, he said at the time. Capital publication.
According to the bank’s statute, for each loan over 5% of the capital, a unanimous decision is made by the board after approval by the Supervisory Board, which the Minister now wants to replace.
An instrument of power
At the beginning of the pandemic, another issue with the main actor BDB flared up. In order for Bulgaria to move towards the adoption of the euro, the ECB inspected the banking sector and found insufficient capital in two banks, one of which was Fibank. In order to obtain this capital, as a matter of urgency, the state entered Fibank through BDB, gaining 19% (a share that gives only the right to convene general meetings – note a.) of the capital after its increase at a price higher than the shares of the private bank traded on the stock exchange at that time. This led to numerous reproaches to the ruling party and eventually to a parliamentary hearing.
In order not to accept this intervention as illegal state aid from the EU, an investor suddenly appeared to take over part of the capital increase in the person of Karel Komarek, owner of Sazka Group, one of the largest gambling operators in Europe and who in the past he had an interest in acquiring the business of Vasil Bozhkov.
Among the biggest clients of BDB is also The State Consolidation Company (DCC, also under the auspices of the Ministry of Economy) – the one to the activity of which the caretaker Minister Kiril Petkov is also interested in an inspection and about which almost nothing is known. In recent years, DCC has received loans of nearly BGN 200 million, which it secures with its shares in state-owned companies, and the conditions for its last disbursement have been eased, including through deferred installments. BDB’s funding for DCC began in 2016, with the BGN 37 million initially allocated for the nationalization of the Avionams aircraft repair plant. It was part of the corporate possessions of CCB and after the bankruptcy of the bank it was sold due to debts to it.
Shift guide
For now, Kiril Petkov has announced that he will replace the Supervisory Board, with whose approval BDB grants its loans.
Its chairman is Stamen Yanev – director of the Bulgarian Investment Agency, who took office after Lachezar Borisov was promoted from deputy minister of economy to minister and had to vacate the post. The deputy chairman is Mitko Simeonov, who was previously executive director of the Privatization and Post-Privatization Control Agency and took over under Mavrodiev. A member of the Supervisory Board is Velina Burska, who was director of Post-Privatization Control at the Privatization Agency, which was formerly headed by former Economy Minister Emil Karanikolov.
Members of the Management Board and with equal powers are the three executive directors Zhivko Todorov (former financial director of Fibank and appointed to replace Mavrodiev after his dismissal), Nikolay Dimitrov (BDB staff before Stoyan Mavrodiev, former director of Lending). and Panayot Filipov. The latter took the post of Rumen Mitrov – close to Mavrodiev and removed from the bank after Mavrodiev’s dismissal. Mitrov is a former director of “Coordination, Analysis and Policy of Regulatory and Supervisory Activities” at the FSC – a directorate established by Mavrodiev when he headed the financial supervision and through which he took over the functions of the deputy chairmen.
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