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Bulgaria's finance ministry says it will change the law to allow payments to be made to depositors at troubled Corporate Commercial Bank (CCB) if discrepancies with EU law are found. The European Commission has started infringement proceedings against Bulgaria after CCB clients were denied access to their deposits for more than three months.

The EC said in a September 25 statement that it is opening infringement proceedings against Bulgaria for its failure to correctly transpose two articles of the Deposit Guarantee Scheme Directive, and because of the principle of free movement of capital. It criticised Bulgaria's deposit guarantee scheme for failing to pay out on claims by depositors at CCB and its subsidiary Commercial Bank Victoria within the timeline set out in the EU's DGS Directive. The Bulgarian authorities now have until October 15 to respond.

"The purpose and the task of such procedure is not to "punish" the respective member state but to determine, in dialogue between the European Commission and the authorities of the member state, whether and what is the infringement of the EU law, what measures should be taken and in what time periods," said a statement from the Bulgarian finance ministry issued the following day.

The ministry adds that in its response to the EC, Sofia "expressed its readiness to take the necessary actions to make legislative changes should any discrepancies with the EU law be established".

As the first stage in infringement proceedings, the EC has sent a letter of formal notice to Bulgaria. EC officials have already been in discussions with Bulgarian officials for several weeks.

The Bulgarian National Bank (BNB) announced on June 20 that it has taken CCB, Bulgaria's fourth largest bank by assets, under administration for three months after a bank run forced the lender to close its doors. The run was triggered by reports connecting BNB's deputy governor and head of banking supervision Tsvetan Gounev with allegations of corruption at CCB.

The period of BNB administration has since been extended until until November 20. This has left BNB clients without access to their deposits for several months, sparking a series of protests in Sofia and other cities.

"The Commission expects that depositors will be given immediate access to the amount of bank deposits to which they are entitled," the EC said on September 25.

It says that Bulgarian law, which states that the deposit guarantee scheme is authorised to pay out only if the central bank has revoked the bank's licence, is not in line with the EU DGS Directive.

According to the EC statement, the conservatorship imposed by the Bulgarian authorities on the two banks also "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," it says.

CCB's largest shareholder, Bulgarian businessman Tsvetan Vassilev, was detained in Serbia on September on September 16, and is currently under house arrest in Belgrade. Vassilev is wanted by the Bulgarian authorities in connection to the liquidity crisis at the bank.

Meanwhile, Bulgaria's caretaker government and BNB officials are in talks with other major CCB shareholders in an attempt to secure a bailout package for the bank. Aside from Vassilev, the bank's main shareholders are Luxembourg-registered Bulgarian Acquisition Co, which is controlled by Oman's sovereign wealth fund the State General Reserve Fund of Oman, and Russia's VTB Group.