KTB Files: What Happened?

The bankruptcy of CCB is the biggest in Bulgaria's history. The written-off assets are worth BGN 4.22 billion, equivalent to about 5% of the annual national income. Translated to the size of the US economy, this would equate to nearly a trillion dollars. The amount exceeds the country's annual spending on national defence and security, education, healthcare, or all social payments outside pensions. It is roughly equal to the sum of all pensions in half a year. Paying only the guaranteed deposits of citizens increased Bulgaria's public debt by nearly 20%.

The journey of the CCB from small and insignificant to the fourth-largest bank in Bulgaria took a decade. During this period, its assets grew at an annual rate of almost 50% and the share of CCB in the total assets of the Bulgarian banking system increased 17 times.

This was achieved through very close and suspicious "cooperation" with the state, attracting deposits from large state-owned companies and investing in sectors tightly regulated and managed by the state, such as the energy or defence industries.

The CCB has created a legally hidden but publicly apparent vicious symbiosis with a large group of influential media, brazenly serving and inflating the bank's public image and relentlessly attacking all its critics and opponents.

The CCB entered into an opaque relationship with foreign capital, at least some of which is blatantly subordinate to the government of a foreign country.

Both the bank's sudden rise and its even more sudden fall clearly indicate the coexistence of two types of state institutions in Bulgaria: those that are captured by private (or foreign government) interests and those incapable of deterring and countering those interests.



Concerns

Suppose all the socio-political aspects of the CCB phenomenon are not thoroughly examined. In that case, there is a real danger that Bulgarian society will fail to learn from its mistakes and become incapable of resisting attempts to capture its state in the future.

So far, the ongoing investigations by the prosecutor's office and the parliament have skimmed over legalistic and political surfaces. It is uncertain whether they will reveal the hidden, intertwined mechanisms of state capture even on the enormous scale of the CCB debacle. Even if they are unravelled, the public will likely remain unaware of their existence. Without a thorough investigation of the causes behind this phenomenon’s emergence and growth, Bulgarian society will be unable to make meaningful conclusions or modify the institutions that can truly counter such future occurrences. Subsequently, this phenomenon will undoubtedly develop again.

That is why we, three Bulgarian NGOs—the Centre for Liberal Strategies, Transparency International—Bulgaria, and the Access to Information Programme—have decided to unite in a common effort. Our strategic goal is to help create genuine capacity inside Bulgarian public institutions to serve the public interest authentically while significantly reducing their vulnerability to exploitation and corruption.

To achieve this goal, we will aim to do three things:

To uncover the mechanisms of state capture

The first step is to reveal in full depth and interrelated complexity the specific mechanisms of state capture and corruption that enabled the CCB phenomenon. This involves uncovering the role of individuals, state institutions and regulations, the media and foreign actors in both the rise and fall of the bank.

Outlining changes in institutions and laws

Based on our general knowledge of the issues of states being captured by private interests and our specific knowledge of the CCB case, our second step is to outline potentially effective changes in specific institutions and regulatory frameworks in two distinct directions. The first direction would be to reduce the susceptibility of key governmental agencies to capture and corruption. The second direction would be to increase the ability to control and deter state bodies from countering similar initiatives and practices in the future.

Create publicity on the issue of what happened with the CCB

The third is to create publicity on the subject, our findings and proposals for change in order to foster public comprehension and discussion of ideas aimed at enhancing the efficiency of public institutions. All of our information and knowledge about the CCB case will be immediately published and available for all to use in the hope that this will help generate civil pressure to achieve the same goal. Our ultimate objective is that this will enable other Bulgarian citizens, organisations and media to join this effort.

The website’s project is www.ktbfiles.com