Bulgaria must allow bank customers to access their money

The European Commission is opening infringement proceedings against the Republic of Bulgaria for its failure to correctly transpose Articles 1(3) and 10(1) of Directive 94/19/EC (the Deposit Guarantee Scheme Directive) as well as its failure to comply with the principle of free movement of capital under Article 63 TFEU.

By opening these infringement proceedings, the Commission is exercising its responsibility to monitor compliance with EU law by Member States. The Commission expects that depositors will be given immediate access to the amount of bank deposits to which they are entitled.

The Commission is sending a letter of formal notice to Bulgaria, the first formal stage in infringement proceedings. Bulgaria has until 15 October to respond.

Failure to transpose the Deposit Guarantee Scheme Directive

The DGS Directive identifies three steps in the procedure to allow a deposit guarantee scheme to pay the claims of depositors:

• 1) 

  The competent authority is satisfied that a deposit which is due and payable has not been paid by a credit institution .

• 2) 

  Within five working days after this conclusion, the competent authority must determine whether the credit institution concerned appears to be unable for the time being, for reasons which are directly related to its financial circumstances, to repay deposits which are due and payable and to have no current prospect of being able to do so.

• 3) 

  The deposit guarantee scheme must be in a position to pay duly verified claims of depositors within 20 working days after the determination by the competent authority.

Under Bulgarian law, the deposit guarantee scheme is authorised to pay the claims of depositors against a credit institution only if the central bank has revoked the banking licence of the institution concerned. The DGS Directive contains no such requirement. The unavailability of deposits is sufficient to activate the deposit guarantee scheme. ¹ In the case in hand, the deposits have been unavailable for three months. Under general EU law principles, nation al authorities are required to apply the Directive in spite of contradicting provisions of national law.

As regards the Treaty principle of free movement of capital, the conservatorship imposed by the Bulgarian authorities on the banks concerned appears to constitute a non-justified and disproportionate restriction to the free movement of capital. The Commission notes in particular that the two banks have been put into conservatorship with a complete suspension of payments and bank activities even though the domestic law allows less intrusive measures, permitting a choice between full and partial suspension of payments and limitation of activities.

In addition, the Commission recalls that EU law takes precedence over national law. The relevant provisions of the DGS Directive, which are unconditional, sufficiently clear and precise, may under certain conditions confer rights on individuals and businesses. These rights can be enforced against the relevant bodies before a national court in order to obtain payments in respect of unavailable deposits according to Article 10(1) of the DGS Directive.

Background

The Bulgarian deposit guarantee scheme is currently not paying out on claims by depositors of Corporate Commercial Bank AD and Commercial Bank Victoria EAD within the timeline foreseen in the DGS Directive.

Both banks have been closed since the second half of June. Depositors have not had access to their funds for three months. According to a decision by the Bulgarian National Bank (BNB) on 16 September 2014, no decision will be taken before end-November. Given the severe consequences for households and companies alike, Commission services have been in close contact with the Bulgarian authorities over the last couple of weeks in order to assist the national authorities in finding an adequate solution. The current situation may undermine public trust in the deposit guarantee scheme in Bulgaria.

The objective of the DGS Directive ( Directive 94/19/EC ) is to ensure a harmonised level of deposit protection by all recognised DGSs, regardless of where the deposits are located in the Union.

Article 63 of the Treaty TFEU prohibits restrictions on movement of capital and on payments between Member States and between Member States and third countries.