Банкеръ Weekly



A seemingly protocol high-level meeting was held in the big conference hall of the Bulgarian National Bank (BNB) on September 13. BNB Governor Ivan Iskrov and the Chairman of Turkey's Bank Regulation and Supervision Agency, Tevfik Bilgin, signed a memorandum of understanding between the two institutions. But the act is protocol only at first sight. In fact, it is of great importance for the controlling of the solvency and the financial condition of Turkish crediting institutions operating in Bulgaria as well as of Bulgarian banks in Turkey when they are established. The memorandum sets the rules under which the BNB Bank Supervision Department will be able to request information about the owners of Turkish crediting institutions operating in Bulgaria when controlling their business. Apart from data about the financial condition of the Turkish institutions owning banks or bank branches in Bulgaria, BNB will be allowed to request that the Bank Regulation and Supervision Agency make inspections in order to help for clarifying problems that might appear. For the present, the memorandum will bring profit mainly to the Bulgarian state, since there is one crediting institution in Bulgaria owned by the Turkish shareholder, D Commerce Bank (the former Demirbank Bulgaria), and a branch of one of Turkey's largest banks, TC Ziraat Bankasi. Bulgarian banks do not have their subsidiaries in Turkey yet.Memoranda of understanding between the Bulgarian banking supervision and similar bodies in other countries are sometimes decisive for making decisions on the future of a financially unstable crediting institution. In 1999, for example, the BNB experts suspected reasonably that the managers of the Balkans Universal Bank (BUB) cheated on them by saying they kept EUR2.5MN in the Bank of Cyprus. The amount existed in the BUB balance-sheets and it helped the Bulgarian bank prove on paper that it had the necessary amounts to pay off its debts. The lack of a collaboration agreement with the Central Bank of Cyprus delayed the inspection about the existence of the EUR2.5MN by nearly half a year. Eventually it turned out that BUB's account with the Bank of Cyprus contained EUR575 instead of EUR2.5MN. Only after BNB received an official announcement was it able to suspend BUB's licence and ask that the court declare it insolvent.

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