Bulgaria's KTB Can Be Rescued, Experts Say

The Expert Consultative Council on KTB, a Bulgarian business representatives' group, has proposed a list of measures to rescue the troubled lender without burden to taxpayers.

The Council was set by representatives of employers, unions and financiers in early August to propose a balanced solution for the future of Corporate Commercial Bank (KTB) and its wholly-owned subsidiary Victoria Bank.

Stating that direct losses for KTB’s clients and indirect losses for Bulgaria’s economy from tipping the banking group into insolvency will exceed by far the Council’s most pessimistic estimates of the cost of financial stabilization of the banks, the Council said it sees no irrefutable evidence for their imminent insolvency and believes they can be rescued and continue their operations.

“We firmly reject attempts to resolve KTB’s problems at the expense of taxpayer…The cost of a bailout could be covered using the bank’s own capital, accumulated reserves, provisions against losses set aside at KTB as well as funds belonging to bondholders and depositors not protected by the Law on Bank Deposits Guarantee,” the Council said in a memo carried by Bulgarian daily Trud on Thursday.

According to the Council, the Bulgarian National Bank (BNB), which is directly running KTB since placing it under special supervision on June 20, has a multitude of options at its disposal to rescue Bulgaria’s fourth-biggest lender.

These options include asking KTB’s shareholders to increase its capital and boost liquidity without waiting for months for a precise estimate of the shortfall to be made.

“[…] if the required capital increase turns out to be insufficient, new higher requirements can be set later,” the Council...