“Dangerous Family Liaisons” in Bulgarian Banking System Mind the horns!

Nelly Kordovska is Acting Head of the Banking Supervision Department of the central bank (Bulgarian National Bank, BNB) and Deputy Governor of the Deposits Guarantee Fund. According to Capital daily, her own brother, Rumen Stamov, is Director of Private Banking in First Investment Bank (FIB). For the third day now, the information is not refuted neither by Kordovska or Stamov.

This kinship must be assessed in the light of events in recent months. Nelly Kordovska took over banking supervision after charges were pressed against Tsvetan Gunev, shortly before the sinking of Corporate Commercial Bank, CCB, which was refused liquidity support. A few days later, FIB also started to sink, however, a lifeline with government money was thrown to it.

After the rescue operation, FIB was placed under strict supervision over the received State aid of 1.2 billion euro. The Chief Supervisor then was Nelly Kordovska.

This supervision will remain in history. In September, the Bank, supplied with taxpayers’ money, granted some “mere” 40 million euro in a loan to the company Semita Build. The company has one employee and almost no assets. Non-performing loans to connected parties for hundreds of millions were renegotiated for the future. This way they do not look bad and do not need to be serviced.

Bivol conducted a series of investigations, backed by irrefutable evidence (see here, here, here and here), showing that the Bank had granted loans to offshore companies, connected to its owners, in the amount of hundreds of millions of euro. The “invested” in this way huge capital inadmissibly exceeds even the equity of FIB. Our media sent the evidence to BNB’s Supervision, before publishing it, as a signal for a probe. Instead of an adequate and responsible reaction, BNB reacted aggressively, refusing to carry out such probe. In turn, the Financial Supervision Commission, FSC, started sending threatening correspondence with absurd requests for the personal data of the members of Bivol’s team. This provoked an immediate reaction of Reporters Without Borders. After the inadequate reaction of the responsible Bulgarian institutions, Bivol decided to send the evidence and the documents to the European Commission and the Prosecution.

Kordovska’s Supervision is keeping silent, not always, however. Like Stoyan Mavrodiev from FSC, Nelly Kordovska from BNB supervises the media. The difference is that instead of fining them directly, she referrers them to the Prosecution if they dare to publish information of great public interest. Such is the case with the publications of Economedia, recently visited by the business police.

In her other capacity, as Deputy Governor of the Deposits Guarantee Fund, Kordovska operates in a manner from which her brother’s Bank has clearly benefited. First, the Deposits Guarantee Fund suddenly released its boss Rossen Nikolov (November 19, 2014) and replaced him with Radoslav Milenkov – former employee of FIB. A few days later, (November 24, 2014), the Fund decided which banks will serve the CCB deposits. The decision was made “in the dark” because no one knew how many deposits were distributed according to the social security numbers of their owners. This was known only by the Fund and the conservators of CCB. The Fund chose nine banks, including FIB. The latter was given another group of depositors – all foreigners – just in case.

The results are clear today. BNB’s reports for December 2014 show that compared to September 2014, FIB lost 339 million levs from its corporate clients, however, the Bank is the green, because it has attracted 571 million levs from private investors. Who are they?

Estimates of the Fund show that people with social security numbers ending in 9, which were serviced by FIB, have been paid 459,920,702 levs and foreign entities were paid 131,154,857 levs. Put two and two together and calculate where FIB would be today were it not for this manna from the institution of “big sis”.

An interesting question is where little brother’s Bank will be tomorrow, because even if Kordovska shows some shame and professional ethics and withdraws from her leading positions, the Fund is now empty. The Fund is empty, but not Kordovska’s personal account. Financial journalist Miroslav Ivanov disclosed a document that reveals that she had a “fat “euro account in CCB, which had been withdrawn one day before the closure of the bank. Such action is explained by the insider information that the supervisor had, thanks to her official position. Isn’t this a blatant conflict of interest? How was it ever possible for BNB to replace Gunev with an individual who had accounts in CCB and precisely at the moment when the fate of this bank was being decided?

Where is that money now? Is it possible for it to be with little brother in the supervised FIB, with an “appropriate” interest rate? However, we hardly need to worry about the assets of such an exceptional professional as Kordovska, who apparently mastered all the intricacies of supervision when overseeing her own money.

For the supervision of public money, we will clearly need to trust the professionalism of little brother and of Georgiou Georgios. The latter manages amounts of FIB approaching the still-unrepaid aid from the budget.

P.S. Following the publication in Miroslav Ivanov’s blog, evidence emerged that Nelly Kordovska has withdrawn her deposit in euros from CCB after the Bank’s close of business. The special client was in possession of another deposit in levs, which was covered by the Deposits Guarantee Fund.

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