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PRESS RELEASE

6 November 2014

Today, 06.11.2014, pursuant to Art. 103, para. 1, item 1 of the Law on Credit Institutions (LCI), in relation to Art. 62 (a) and Art. 63 (c) of Regulation (EU) No. 575/2013, Art. 103, para. 2, item 25, Art. 103, para. 4 and Art. 151, para. 1 – 3 of LCI, the BNB Governing Council revoked the permit issued to Corporate Commercial Bank AD under Order No. BNB - 43011/28.03.2014 of the BNB Deputy Governor in charge of the Banking Supervision Department. In accordance with this order of the Deputy Governor, KTB AD was permitted to include in its Tier 2 capital an amount equal to the Lev equivalent of EUR 35,000,000 (thirty-five million euro), attracted under a loan agreement for provision of funds in the form of a subordinated term debt, concluded on 24.03.2014 between the bank as a borrower and Technology Center – Institute of Microelectronics (TC-IME) AD as the lender.

During the supervisory inspection of KTB conducted in the period 04.07.2014 – 14.10.2014, based on data as of 30.06.2014, the findings of which were reflected in Report No. BNB-125089/27.10.2014, it was found that the bank has indirectly financed the lender and the full amount paid by the latter to KTB under the agreement was paid with funds provided by the bank itself. This has happened, as follows:

1. Under a loan agreement of 25.03.2014 between the bank and Dunarit AD for EUR 15,000,000, the full amount was withdrawn and was transferred on the same date into the account of TC-IME with the bank;

2. Under a loan agreement of 25.03.2014 between the bank and Targovski Park Trakia EAD for EUR 6,000,000 the amount was transferred on the same date into the account of TC-IME with the bank;

3. Under a loan agreement of 25.03.2014 between the bank and Planasat AD for EUR 5,000,000 the full amount was withdrawn on the same date and was transferred into the account of Ken Trade, and from there it was further transferred into an account of Hydroenergiini Proekti EOOD and from it – to Bromak EOOD;

4. Under a loan agreement of 25.03.2014 between the bank and River Invest AD for EUR 8,000,000 the full amount was withdrawn and transferred into an account of Hedge Investment Bulgaria EAD, and from there – into the account of Optima Intertrade AD;

5. Under a loan agreement of 25.03.2014 between the bank and Optima Intertrade AD for EUR 5,000,000 the full amount was withdrawn and was transferred into the company’s account;

6. On 25.03.2014 the funds accumulated as a result of the transactions under items 4 and 5, totaling EUR 13,000,000 were transferred by Optima Intertrade AD into an account of Bromak EOOD;

7. On 25.03.2014 the funds accumulated as a result of the transactions under items 3 и 6 totaling EUR 18,000,000 were transferred by Bromak EOOD to the account of Central Techno-Invest EAD with KTB and from there into an account of TC-IME with the same bank;

8. From the funds accumulated as a result of the transactions under items 1, 2 and 7 - EUR 39,000,000 in total, on 25.03.2014 TC-IME transferred into an account of the bank the amount of EUR 35,000,000 under the subordinated term debt agreement.

Thus, Corporate Commercial Bank AD has indirectly financed the payments to itself effected by the lender Technology Center – Institute of Microelectronics (TC-IME) AD under the subordinated term debt agreement of 24.03.2014 between the bank and Technology Center – Institute of Microelectronics (TC-IME) AD.

In accordance with the requirement under Art. 62 (a) in relation to Art. 63 (c) of Regulation (EU) No. 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ, L 176/1 of 27 June 2013), hereinafter referred to as “Regulation (ЕU) No. 575/2013” (into force from 01.01.2014), a condition with regard to capital instruments recognized as Tier 2 capital is that the granting of the loan is not funded directly or indirectly by the bank.

To prove the compliance with the requirements under Regulation (ЕU) No. 575/2013, it is explicitly provided for in Art.1.3 of the subordinated term debt agreement of 24.03.2014, signed by Corporate Commercial Bank AD and Technology Center – Institute of Microelectronics (TC-IME) AD that „"The provision of the subordinated term debt shall not be financed, directly or indirectly, by KTB AD." It is obvious from the above facts, established by the supervisory inspection and supported by primary documents, that this circumstance does not comply with the requirements of the legal framework.

The Sofia City Prosecutor’s Office has already been notified about the above listed findings of violations, and on 27.10.2014 the Report from the BNB’s supervisory inspection carried out in KTB in the period 04.07.2014 -14.10.2014, was sent to it under Out-going ref. No. BNB-125089/27.10.2014.