Parliamentary Ad Hoc Committee Approves Draft Amendments Invalidating Set-offs in Insolvent Banks

Parliamentary Ad Hoc Committee Approves Draft Amendments Invalidating Set-offs in Insolvent Banks

The National Assembly Ad Hoc Budget and Finance Committee Tuesday conclusively approved draft amendments to the Bank Bankruptcy Act, limiting the validity of set-offs effected by a bankrupt bank's creditors to the share to which each of them is entitled upon the distribution of monetized assets.
The draft legislation was prompted by the huge number of assignments which have taken place since the Corporate Commercial Bank (Corpbank) was placed by the central bank under special supervision on June 20, 2014 after a run by depositors left it illiquid and it suspended all operations. In these transactions, holders of deposits with the bank exceeding 196,000 leva, which are not guaranteed, have been selling their deposits to companies owing a loan debt to that bank, so that the latter could set off the amounts due against the amounts deposited.
Committee Chair Menda Stoyanova commented to journalists that the revisions are intended to protect the public interest. "If a borrower owing a secured debt of, say, 1 million leva, decides to buy a 1 million lev deposit, he carries out an assignment that is legally admissible," Stoyanova explained. "In this way, the borrower becomes a depositor with the bank and asks the bank's conservators to set off the deposit against his loan debt. If such a set-off is effected, this means that the borrower will settle his debt without paying any money into the bank's bankruptcy estate. For his part, the depositor would receive an amount exceeding the guaranteed threshold."
 
Previous Next
Close
Test Caption
Test Description goes like this
Cookies Preferences
Choose Type of Cookies You Accept Using


These cookies are required for the website to run and cannot be switched off. Such cookie are only set in response to actions made by you such as language, currency, login session, privacy preferences. You can set your browser to block these cookies but our site may not work then.


These cookies allow us to measure visitors traffic and see traffic sources by collecting information in data sets. They also help us understand which products and actions are more popular than others.


These cookies are usually set by our marketing and advertising partners. They may be used by them to build a profile of your interest and later show you relevant ads. If you do not allow these cookies you will not experience targeted ads for your interests.