UPDATE 2-Bulgaria ready to rescue Corpbank after bank run
* Auditors to assess Corpbank liabilities within 10 days
* Two state institutions to inject capital into Corpbank
* Crisis hits Bulgaria ahead of bond road show
* Government appeals to Bulgarians to keep calm (Adds quote, details, background)
SOFIA, June 22 (Reuters) - Bulgaria is ready to rescue Corporate Commercial Bank (Corpbank) by injecting capital and enforcing losses on shareholders, the central bank said on Sunday, after a run on the country's No. 4 lender prompted the central bank to take it over on Friday.
The central bank said the government was also prepared to inject capital into a subsidiary that Sofia-listed Corpbank recently bought from France's Credit Agricole and which has been taken over by the central bank as well.
It was not immediately clear how much capital would be needed to prop up Corpbank - which had loans of almost 5 billion levs ($3.5 billion) as of March, and capital of 622 million levs - and the subsidiary.
The central bank said it would ask independent auditors to provide a full assessment of Corpbank group's assets and liabilities within ten days. Corpbank and its subsidiary will re-open on July 21, the central bank added in a statement.
The case marks the first rescue of a Bulgarian bank following a financial crisis which has seen EU states pump more than 5 trillion euros ($6.8 trillion) into ailing lenders including Spanish No.4 Bankia, Ireland's AIB and Permanent TSB, Britain's Royal Bank of Scotland , and Greece's four largest banks.
The Bulgarian central bank on Friday took control of Corpbank for three months while pleading with depositors - many of them queuing up outside Corpbank branches - not to panic.
The bank run started after media reports of suspect deals involving the bank and its top shareholder. Both have denied any wrongdoing.
Eager to avoid panic spreading to other Bulgarian lenders, government ministers have urged people to stay calm and stressed Corpbank's problems were an isolated case. On Saturday the deputy prime minister said citizens would "not lose a single lev" as a result of Corpbank's problems.
The crisis is another headache for Prime Minister Plamen Oresharski's minority government, which has struggled to revive economic growth and stem a sharp drop in foreign investment, and is due to resign shortly after losing European elections in May.
The ongoing political instability prompted Standard and Poor's to downgrade Bulgaria's sovereign credit rating to one notch above junk earlier in June.
The bank run hit Bulgaria on the eve of an investor road show in Europe to raise 1.5 billion euros from bond sales. The money is needed to roll over bonds that mature in January and finance a budget deficit planned at 1.8 percent of GDP for 2014.
The bank run was also an ugly reminder for Bulgarians of a domestic financial crisis in 1996-1997 that bankrupted 14 banks and forced the introduction of a currency board regime, which pegs the local lev currency to the euro.
By law, Bulgarian bank deposits in local and foreign currencies are guaranteed up to 196,000 levs ($136,600), or 100,000 euros, mirroring a guarantee across all 28 EU countries.
"Actions will be undertaken to write off the capital of the shareholders of the (Corpbank) banking group and revoke their rights in accordance with the procedures stipulated by law," the central bank said.
The leading shareholders in Corpbank are Bulgarian businessman Tsvetan Vassilev, with just over half the company; Oman's sovereign wealth fund, with around 30 percent; and Russia's VTB Asset Management, with nearly 10 percent.
The bank had subordinated debt with a value of 198 million levs at the end of March. Several bailed out European banks have forced their subordinated bondholders to share losses, but Bulgaria has not yet said how it will treat Corpbank's.
Corpbank is suffering a liquidity shortage but the central bank stressed that the lender was not bankrupt, implying that its assets are still worth more than its liabilities. Liquidity shortages, or an inability to borrow money from other banks to fund bills as they fall due, can occur when there are concerns that banks do not have a big enough cushion to fund losses.
The central bank governor had said he would start talks with Corpbank's shareholders on what kind of support they could offer. But on Sunday the central bank said it would order the state-run Bulgarian Development Bank and the country's Deposit Insurance Fund to inject capital into Corpbank and its unit.
"My personal opinion is that initial talks with the shareholders have already been carried out, following which the bank has committed to undertake the following steps," said a board member of the Deposit Insurance Fund by phone.
"In short, as of July 21 the bank will open as a state bank. This is good because it means all deposits will be safe," Bisser Manolov told Reuters, stressing that he was speaking in a personal capacity and not on behalf of the Fund.
The central bank governor on Friday said depositors in Corpbank had stepped up withdrawals after an anonymous letter was leaked to media that said the central bank's deputy governor in charge of banking supervision was being investigated by prosecutors for abuse of office.
Bulgarian media linked the investigation of the deputy governor to allegations of wrongdoing at Corpbank.
The central bank has since confirmed the investigation and said the deputy governor had taken a voluntary leave of absence.
Bulgarian tobacco company Bulgartabac, one of Corpbank's prominent clients, also announced earlier this week it was taking its accounts out of the bank.
($1 = 0.7366 Euros) (Additional reporting by Laura Noonan in London; Editing by Mark Potter)
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