Jump to content
House Price Crash Forum
Sign in to follow this  
interestrateripoff

Peak Ponzi: Only 13% Of Loans In Bulgaria's Fourth Largest Bank Had Valid Collateral

Recommended Posts

http://www.zerohedge.com/news/2014-10-22/peak-ponzi-only-13-loans-bulgarias-fourth-largest-bank-had-valid-collateral

One can debate whether, by virtue of fractional reserve banking, every bank in the world is just a ponzi scheme, and where the stability of the system depends entirely on the level of counterparty faith and general confidence in the system, in other words, a grand con game in which the central bank is tasked with making sure the con works as planned when confidnce gets "a little low."

One can not debate, however, that a bank had become anything but a pure Ponzi scheme - in this case, a piggybank whose funds were embezzled by its owner as described previously in "Fourth Largest Bulgarian Bank Seized After Bank Run: "Let's Not Tear Down Our House" Central Banker Begs" - when a token review, only upon its faillure, reveals that 87% of its loans were invalid!

From Bloomberg:

  • BULGARIA CENTRAL BANK CORPBANK PRE-JUNE REPORTS 'MISLEADING'
  • BULGARIA CENTRAL BANK SAYS CORPBANK ASSETS ARE 6.7B LEV
  • BULGARIA CENTRAL BANK SAYS CORPBANK AUDIT SHOWED ONLY 13 PERCENT OF LOANS HAD VALID COLLATERAL

And more:

Audit report of Bulgaria’s Corporate Commercial Bank, under central bank’s supervision since June 22, shows its assets of 6.66b lev as of Sept. 30 need to be written off by 4.22b lev, central bank in Sofia says on website.

The good news: the level of corruption, embezzlement and loan devastation in a country like Cyprus for example, where the entire banking sector had to be bailed out by Europe, was just a little less than what happened in Bulgaria's fourth largest bank. Actually, it is unclear if that is good news.

The bad news: the Bulgarian central bank "regulator", just like its peers across the continent, and the world, had no idea what the reality of the balance sheet was until the owner vaporized, as did nearly 90% of the bank's funds, to borrow a Corzinism.

Impressive fraud.

Share this post


Link to post
Share on other sites

http://www.reuters.com/article/2014/10/22/bulgaria-banking-idUSL6N0SH4CJ20141022

Bulgaria's Corporate Commercial Bank (Corpbank) needs to write off almost two thirds of its assets due to major failings in the way it was run, an audit commissioned by the central bank found, making a rescue of the lender increasingly unlikely.

The central bank ordered the international audit after Corpbank, Bulgaria's fourth-largest lender, was hit by a run on deposits in June that triggered the country's worst financial crisis since the late 1990s.

The audit found Corpbank needed to write off 4.2 billion levs ($2.7 billion) on total assets of 6.7 billion levs, adding that only 13 percent of Corpbank's loans were properly backed by collateral. The majority of the companies to which Corpbank lent money had little or no business activities or employees, and lent the money on to third parties, the audit said.

"In the bank's activities, unusual for the banking system, bad business practices are observed, which were carried out though sophisticated operations aimed to cover the nature of deals and transactions," the central bank said on Wednesday.

"One example of this is the specific mode of lending, carried through 'special purpose vehicles' and similar holdings, in order to finance the acquisition of assets, that does not conform to standard and sound banking practices."

Share this post


Link to post
Share on other sites

I assume the banker that wrote the loans booked their profits in advance and took their bonuses.

I've been reading the Faisal Islam book "The Default Line" about the British crash. The basic method for the bankers was:

1. Bypass the regulations (the regulators simply can't keep up). Manipulation of risk analysis was the key to this.

2. Book future profits immediately and get the bonus

3. Ignore consequences, someone else's problem

.....and of course, nothing has really changed since then, Bulgaria or otherwise.

The book is highly recommended for HPC'rs. He had good access to the political/financial insiders at the time.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   211 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.