Банкеръ Weekly



A sharp conflict between the legal and economic wing of the National Movement Simeon II (NMSII) questions the second tranche under the 2-year standby agreement with the International Monetary Fund (IMF). One of the fixed requirements in it (the so-called structural criteria) is that the Bank Insolvency Bill should be discussed in Parliament by end-March. But this draft may become the apple of discord for NMSII's deputies. The bill has been worked out by the Chairman of the Parliamentary Economic Committee Valeri Dimitrov, a lawyer of long experience at the Bulgarian National Bank (BNB) before entering the National Assembly as MP of the NMSII. Most of the lawsuits for adjudicating 19 banks bankrupt passed through him. Mr. Dimitrov may presently rely on the support of Ivan Iskrov, Chairman of the Parliamentary Budgetary and Finance Committee and Roumyana Georgieva, who headed BNB's Special Supervision Department during the last four years. The central bank's managerial team and IMF's representatives also back Mr. Dimitrov.However, quite a strong lobby, headed by the National Assembly Chairman Ognyan Gerdjikov and the Chairperson of the Parliamentary Legal Committee Aneliya Mingova opposed the draft bill. They are supported by all deputies, who were judges, lawyers and trustees in banruptcy before becoming MPs, whose number is not small.The magistrates' lobby is against the overall spirit of the Bank Insolvency Bill. It does not accept cutting-off the court's rights to control the trustees in bankruptcies, establish the liabilities and receivables of bankrupt financial institutions, and sell their property.The court system, on its part, is discontent that the adminsitration of bank insolvency would be entrusted to the Bank Deposit Insurance Fund (BDIF) and that some of its decisions (such as the appointment of trustees in bankruptcy, their salaries, the approval of their budget and of the programmes for selling the property of bankrupts banks) shall not be liable to appeal.Valeri Dimitrov and BNB's representatives claim that unlike the court, the BDIF has at its disposal more resources for exercising constant and efficient control on the activities of trustees in bankruptcy. The magistrtates' lobby, however, believes that the rights entrusted to the BDIF contradict the Constitution. According to some MPs, a new law for bank insolvency is not necessary at all, and only the provisions in the efficient Banks Act, regulating this process should be amended. Others claim that the provisions in the Commercial Code on insolvency in general (concerning all companies - commercial, manufacturing and financial) should be amended before drafting a special law for bank insolvency.Some magistrates go even further, questioning BNB's right to declare banks insolvent, without such decisions being liable to appeal. The criticizers of the Bank Insolvency Bill may be very good lawyers, but they hardly realize the chaos that would be caused if BNB's decisions for adjudicating banks bankrupt can be appealed. This would block the entire process and the depositors will have to wait for years to get their money from the BDIF, because it may effect the payments only after insolvency procedures are opened.No end of this disputable issue can be seen, but one thing is certain: if the Bank Insolvency Bill is not discussed in the parliamentary committees by end-March and passed in reasonable terms, the extension of tranches under the 2-year standby agreement with the IMF will be in jeopardy. A year ago the Bank Insolvency Bill was again a criterion in the agreement with the IMF, but it was advisable then, while now it is among the mandatory requirements. The IMF would hardly admit to be beguiled with various well-known parliamentary tricks.The 6-year-old history of bank insolvency showed that it did not go perfectly under the court system's control. The State's receivables from the closed banks amounted to some DEM2BN, of which the budget received just one tenth, at that after spinning out for three years. Due to the scandals in the bankrupt financial institutions, the public became strongly suspicious that the bank insolvency processes are closely connected with cronyism and even corrupt practicies in the court system. The IMF and the World Bank warned about this problem in their 2001 reports.

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