GUARANTEE ON DEPOSITS TO BECOME EQUAL WITH THAT IN EU
As of April 12 all deposits of individuals and companies in Bulgaria smaller than BGN25,000 will be guaranteed by the Deposit Insurance Fund. This means that if a bank in this country is declared insolvent, the deposits made in it by citizens and commercial companies, shall be repaid to the full amount if they are below BGN25,000. Repayment of the remaining part of their money will depend on how quickly and efficiently the bank's trustees in bankruptcy sell out its assets to get cash. If a citizen has a BGN50,000 deposit in a bankrupt bank, he will receive BGN25,000 from the Deposit Insurance Fund and by the remaining BGN25,000 he will be listed together with the bank's other creditors. The list of creditors is drafted by the bank's trustees in bankruptcy and is approved by court. When a citizen or a firm have more than one deposit in a failed bank, the amount of deposits and accounts is unified and the guarantee is payable on the aggregate size. E.g. if a person has a BGN24,000 deposit and the balance in his current account or debit card is BGN2,000, the fund will pay him only BGN25,000. For the remaining BGN1,000 he will have to wait on the list of creditors (fourth rate) together with the other citizens, firms and the Deposit Insurance Fund. Their receivables will be satisfied only after the failed bank repays its liabilities to creditors, guaranteed by a mortgage or a special pledge, and after covering the current expenses for the insitutions' bankruptcy.Natural persons and firms should bear in mind that if they have debts to the bankrupt bank, their amount will be deducted from the amount of deposits, liable to a guarantee. If a company has BGN30,000 on accounts in a failed bank and its liabilities to it amount to BGN10,000, the debt will be deducted from the deposits and the remaining BGN20,000 shall be paid by the Deposit Insurance Fund. If the firm owes BGN30,000 and its deposits in the failed bank amount to BGN10,000, its debt will be reduced to BGN20,000. The fund will not pay money to the company and it should immediately pay back BGN20,000 to the insolvent bank. The Deposit Insurance Fund begins to pay the guaranteed amount of deposits not later than 45 days after the date of depriving the commercial bank of its licence. The clients may get their money in the branches of a credit institution, selected by the fund, whose name has been announced in the Official Gazette. Deposits of the clients of the failed Credit Bank and Balkan Universal Bank, for instance, are payable in UBB's branches. The analysts of the Deposit Insurance Fund have established that with the new size of guaranteed deposits, BGN7.2BN or 64.15% of all deposits shall be protected by the fund, which presently has BGN319.4MN at its disposal. The fund resources are sufficient to cover the protected deposits in case of bankruptcy of any bank holding assets worth up to BGN500MN. If any of the top banks in Bulgaria is declared insolvent (stressing there is no such a danger at present) the Deposit Insurance Fund will not have sufficient money to pay off all due guarantees. In such cases the law on guaranteeing deposits stipulates three possible ways out of the situation: the banks pay their annual instalments to the fund in advance, the fund to raise the size of these instalments, or draw a credit by issuing bonds and get direct financing from the banks or the State. Until Bulgaria joins the EU the National Assembly should vote one more increase of the amount of guaranteed deposits. The Bulgarian State has undertaken a commitment to equalize the size of guaranteed deposits with that in the EU, i.e. EUR20,000. For that reason the Deposit Insurance Fund will ensure a guarantee of BGN38,200 in the end of 2006.