Bulgarian SE to Collapse over Retirement Funds Nationalization
The cabinet's decision to transfer the assets of the professional retirement funds to the National Social Security Institute (NOI) was met with strong criticism by the Bulgarian Association of Asset Management Companies (BAAMC).
In a letter sent to Ministers, the business, and the labor unions, the Association, which is the the first professional association of securities portfolio managers in Bulgaria, states the intentions of the government are going to put an end of the country's capital market.
On Wednesday, the cabinet accepted the proposal of Labor and Social Policy Minister, Totyu Mladenov, to transfer private retirement funds of employees eligible for early retirement (pilots, police, military, etc) to NOI over the lack of enough money in them to begin paying retirement pensions to these employees in 2011.
The proposal also received full support from Prime Minister, Boyko Borisov.
BAAMC say the decision equals nationalization without any constitutional, legal, and economic grounds and would lead to the capital market collapse.
The statement was immediately proven true with the Wednesday collapse of the SOFIX index (which follows the 15 largest companies) of the Bulgarian Stock Exchange (BSE) by over 2%.
At the BSE opening Thursday, stocks continued to crumble as investors continued their panic sale of shares over fears the forced nationalization would push retirement funds managements to sell assets quickly. At 10 am SOFIX was down 3.54%, but has recovered slightly to 2.2% down later in the morning.
The Bulgarian Association of Licensed Investment Intermediaries (BALII), a Bulgarian organization of investment intermediaries (securities brokers/dealers), has distributed a similar letter joining BAAMC in their criticism of the cabinet.
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