How the Bulgarian Development Bank Violates its Statute and the Country’s Banking Rules

The Anti-Corruption Fund Foundation (ACF) has notified the public prosecution and the Bulgarian National Bank about questionable loan decisions by the Bulgarian Development Bank (BDB). The questionable loans in question have been issued to companies, connected to Georgi Gergov, a politician and businessman.

The credits, worth EUR 31.8 mln. and issued to International Fair Plovdiv JSC and Sunny Day Residence JSC, violate the statutes of the two companies, as well as banking rules. In addition, according to BDB statute, it is expressly forbidden to issue credits to political parties and connected persons. In this regard, Mr. Gergov, who owns majority stakes in the two companies (the state owns minority stakes in the two companies), falls within the category of connected persons as he is a member of the Executive Board of the Bulgarian Socialist Party.

ACF analyzed documents, outlining the case, and sent reports to the public prosecution and the Bulgarian National Bank. Copies of the reports have been sent to relevant government ministries. ACF is asking the authorities to check the legality of the credit agreements as well as to examine the actions of the supervisory and auditing bodies of the BDB. This is especially important given the fact that Mr. Gergov’s companies are the largest borrowers from BDB.

Besides violating the borrowers’ statutes, the decision to issue the credits violates standard banking risk assessment procedures since the company receiving the credit has not complied with the requirement for financial reporting for the two years before receiving the loan.

ACF expects the notified institutions and all relevant parties to investigate whether political influence was a factor in the decision to issue loans to the companies, controlled by Mr. Gergov.