The recently adopted Law on Deposit Guarantees envisages that the Fund for Bank Deposits’ Guarantees /FBDG/ will have the right to cover the losses instead of the guaranteed depositors in case of measures implemented for banking re-structuring.The old law used to say that the funds collected could be only used for the protection of savings, not exceeding EUR 100,000. The additional function of the fund now comes from Directive 2014/59/EU of the European Parliament establishing a framework for the recovery and resolution of credit institutions and investment firms.

According to the EC the document adopted is part of the new rules of the 28 member-states, aiming to cease the old practices for rescuing banks, of which tax payers suffer in billions in times of crisis. “All the money necessary in cases of bankruptcy should be collected from the sector and in the form of special restructuring funds,” the message of the institution further reads.

So far, so good, we say – it is a fair idea, if the respective budget is provided.

However, the new law under Directive 59 reveals some purely Bulgarian elements in amendments, placing under suspicion the Fund’s abilities to meet the main requirement – to guarantee deposits of up to EUR 100,000.

For instance, the Fund has been significantly decreased to 1 percent of the protected deposits’ sum. The old law said 3 percent. The fund raising term is 9 years, fixed for 3 July 2024 – that horizon is pretty distant for the humble size of the fund. To compare, at the bankruptcy of Corporate Commercial Bank the sum of the fund was not enough to cover the losses. Data of the Central Bank /BNB/ said that the deposits of companies and persons were to the tune of EUR 31.2 billion end-July /EUR 9.2 billion for companies and EUR 22 billion for households/. It is possible that a large part of the money is protected as a process of deposit fragmentation could be observed after the CCB bankruptcy. The Fund’s assets were to the tune of some EUR 250 million and its liabilities – EUR 920 million end-July 2015. The new law also allows whenever a bank has liquidity difficulties the BNB to be able to fully or partially postpone its payments towards the Fund, but the regulator shall not publish information. Thus the responsibility of the financial institutions towards the maintenance of the system’s stability and transparency is reduced.

Banks in trouble will be allowed to reduce the withdrawing of money in the course of no more than 5 days, but on the other hand they will be able to restrict the size of the sums for an unlimited period of time.

A possibility has been created for company accounts to be protected, which is something new and might mean corruption.

We looked for the opinion of four finance and banking experts on this article, but those refused to comment.

Are our savings protected? The question remains open.

English version: Zhivko Stanchev