BDB Management Board refused to provide information on Bank's credit files, Central Bank starts an inspection

The Bulgarian National Bank (BNB) starts a targeted supervisory inspection at the Bulgarian Development Bank (BDB) tomorrow, after they refused to provide full information about the granted loans. This happened after the caretaker Minister of Economy Kiril Petkov convened a briefing earlier today, June 1, to announce that the Bank's Management Board had refused to provide the credit files to the Audit Committee and that he would reefer the matter to the BNB. BDB later announced that the requested information was a bank secret.

On May 26, the caretaker Minister of Economy replaced the members of the Audit Committee in order for it to begin exercising effective control over BDB, because according to its statute it is the body that monitors financial reporting, internal control systems and risk management.

However, the refusal of the Management Board to provide the credit files to the Audit Committee, respectively to the principal, prevents the Minister of Economy from getting an idea of ​​the actual state of the bank, and from there to redirect financial resources to the new measures prepared by the caretaker government in support of businesses and employment.

This morning, the caretaker Minister contacted the BNB about the refusal of the BDB's Board to provide the credit files to the new Audit Committee.

Unfortunately, the Board of Directors of BDB yesterday refused to the Audit Committee, which I appointed to provide information on credit files. In his words, the refusal read: "The information on credit files is ready. But we will not give it to you!". For me, this is a violation of the Independent Audit Act, Article 108, para. 3, said Kiril Petkov, caretaker Minister of Economy.

Petkov said that he was not attacking the bank, but was trying through the Audit Committee to check the credit files of great public interest and to shed light on the process of the granting of loans.

What we want to know is whether these loans are used for the intended purpose and to make sure that they are extended in a way that corresponds with the market, under the right conditions, that the collateral is there with the values ​​that they should be, added Kiril Petkov.

BDB issued a position stating that the Management Board had provided detailed financial information to the Audit Committee.

The board also asked the Public Oversight Commission whether it could provide credit files that were bank secret.

Minister Petkov warned the Board of the Development Bank not to delay the changes to the Statute, through which a ceiling on loans is imposed.

"The new Statute, once proposed by us, must be submitted to the BNB by the same Management Board. I very much hope that there will be no such type of answers as yesterday."

The bank replied that they would comply with the requirements of the Minister of Economy not to grant loans exceeding BGN 5 million, although the new statute with the amended rules has not yet been approved by the BNB.

From the information published on the bank's website, it is clear that for the past 11 years it has granted over BGN 5.6 billion in loans to 18,500 small and medium-sized companies.

"This bank, I think, can and does have liquidity to be a great tool for small and medium-sized enterprises. And my goal is, even with the caretaker Minister of Finance we talked about that, we want to immediately bring in all the liquidity that it has at the moment, to help small and medium-sized enterprises, as part of the measures currently needed for recovery of the economy".

In response to BNT questions, the Bulgarian National Bank said that until late afternoon they had no official information and they get informed by the media.

BNB starts a targeted supervisory check at the Bulgarian Development Bank.

The treasury describes the conflict between the management and the shareholder as an unprecedented situation.

BNB clarifies that they have no direct legal powers over the Audit Committees.

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Earlier in May Economy Minister Petkov said that 8 companies had received a total of nearly 1 billion BGN in loans from the BDB. He argued that was at odds with the BDB Act and the Bank's Statutes, since the BDB is supposed to lend to small and medium-sized businesses. He called a meeting of the BDB Supervisory Board last week to discuss these loans, but two out of the three members of the board refused to attend. Petkov then fired them.

On Thursday, the caretaker minister invited the eight companies that received a total of nearly BGN 1 billion in loans from the development bank and announced that the ceiling on loans would now be up to BGN 5 million for each individual company.

None of the 8 big companies turned up for the meeting with the caretaker Minister of Economy. Most sent written answers and apologised for not being able to attend.

Only the company of the brothers Kiril and Georgi Domuschievi "Navigation Maritime Bulgare" confirmed that it would be present, but later it became clear that they also sent a written reply.

Two of the invited companies did not send a written answer. These are Blagoevgrad BT and Transpect AD.

We received a written answer from all the others, some apologised for not being able to come, others explained what was the intended use of their loans. But all 6 at least say they are paying their loans and have no delay," said caretaker Economy Minister.

Later, through an open letter to the media, "Transpect” company stated that the interest rate of their loan was not preferential, but equal and even higher than the interest rate of commercial banks.

Unfortunately, the conversation you requested has the sole purpose to be used as an indulgence to support the inference you made, by revealing a bank secret, that several companies, including Transpect AD, have misused public resources.

Mr. Petkov, there is no way to convince the public that two young people like us, determined to work, not in the United States, not somewhere in Europe, but here in Bulgaria, are criminals because we are borrowers, the letter said.

The caretaker minister stressed that he wants the Bulgarian Development Bank to start working for small and medium-sized enterprises and the taxpayers' money to be used purposefully and in the best way.

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