* Bulgaria to be first non-euro zone bank to join mechanism
* No political consensus on rescue package for Corpbank
* ECB says not been contacted formally by Bulgaria
* Political parties wrangle over safeguarding deposits
* Prosecutors amend charges against four Corpbank officials
(Adds comments by ECB, government, analyst, adds details,
By Tsvetelia Tsolova
SOFIA, July 15 Bulgaria's central bank has begun
talks with the European Banking Authority about conducting a
review of the quality of its banking supervision, it said on
Tuesday, following runs on two lenders in June.
The Bulgarian National Bank has also been in touch with the
European Central Bank (ECB) about joining the European Single
Supervisory Mechanism (SSM), it said in a statement.
Bulgaria would be the first country outside the 18-nation
euro zone to join the Single Supervisory Mechanism, set up in
response to the global financial and euro zone debt crises,
though neighbouring Romania has said it could apply for
membership next year.
Bulgarian President Rosen Plevneliev announced Sofia's
intention to join the European supervision scheme on Monday, as
the government grapples with the fallout of the country's worst
financial crisis since a number of bank collapses in the 1990s.
There is still no agreement on a deal between the ruling
coalition and the opposition about the terms of a rescue package
after a run on deposits at Corporate Commercial Bank (Corpbank)
, Bulgaria's No. 4 lender, in June.
The run on Corpbank and the subsequent hit on another lender
raised questions about the quality of banking supervision in the
Balkan state, which joined the European Union in 2007 and is its
"It is a very good idea to join Europe's banking union,"
said Georgi Ganev, a lecturer on banking at Sofia University.
"Because of the total collapse of trust in state
institutions, any solution that increases this trust is welcome.
There is a high level of confidence in EU supervisors."
A source familiar with the process said any application
would take several months and could not be processed in time for
Bulgaria's banks to undergo the landmark review of euro zone
lenders that the ECB is carrying out this year.
If the application proceeds, Bulgaria's banks would go
through a similarly robust analysis before the ECB takes over
"We have taken note of the statements made by the Bulgarian
authorities. The ECB hasn't been contacted formally," an ECB
The central bank seized control of Corpbank following a run
on the lender by depositors unnerved by reports of shady deals
involving its main shareholder, Tsvetan Vassilev, and amid a
public feud between Vassilev and a business rival.
Vassilev has denied any wrongdoing and said the run, during
which more than a fifth of deposits were withdrawn, was a plot
against him by his rivals.
The problems at Corpbank, where state companies kept a large
part of their funds for years, have brought renewed scrutiny of
Bulgaria, including the murky relations between the political
elite and powerful businessmen.
The central bank, after talks with the government, has said
it will let Corpbank collapse, transfer the good assets and
liabilities to a recently acquired subsidiary, and initiate
bankruptcy proceedings against the bank.
The plan requires a special law in parliament to be passed.
However, the delay in achieving a political consensus on the
deal means that the planned reopening of the subsidiary, which
would relaunch as a nationalized institution on July 21, could
also be postponed until further notice.
Much of the wrangling has centred on whether the government
can honour an earlier promise that depositors would not "lose a
single lev" as a result of the crisis. The main opposition party
GERB and even members of the ruling Socialist party have
insisted the government guarantee deposits only up to 100,000
The government has said that deposits under 100,000 euros
total 3.6 billion levs ($2.50 billion) in the bank, leaving
about 1.5 billion levs unprotected - money that also includes
deposits of state and private companies, and municipalities.
"The rescue package will ensure the normal work of dozens of
Bulgarian companies and can minimise the overall loss for
society from the halting of the operations of this relatively
big Bulgarian bank," the government said in a statement on
It remains unclear what size of bailout will be required to
prop up the subsidiary. The government may issue new debt, which
could swell Bulgaria's fiscal deficit to 3 percent of gross
domestic product, the finance minister has said, against a
planned 1.8 percent for 2014.
Bulgarian prosecutors have charged four Corpbank officials
with pilfering more than 200 million levs from the bank.
However, prosecutors on Monday tweaked their initial
charges, which accused the officials of taking the money out in
cash a day before the central bank took control. Instead, they
said the funds were gradually embezzled since December 2011.
Two of them, chief cashier Margarita Petrova and the deputy
chief accountant of the bank, will remain in custody. The chief
accountant is under house arrest and Orlin Rusev, one of
Corpbank's executives, was released on bail of 10,000 levs.
A lawyer for Petrova told Reuters her client will plead not
guilty, adding the other three have also denied wrongdoing. The
other officials could not immediately be reached.
"The situation with Corpbank sheds light on illegitimate
links between politicians and businesses. The bank's case is
seen as isolated as this bank had a special role - the
intertwining of political and economic interests," said Daniel
Smilov, a political analyst at the Centre for Liberal
Strategies, a Sofia-based think tank.
"Bulgaria now has a chance to clean up and really prosecute
all those who were responsible for the situation," he said.
($1 = 1.4376 Bulgarian levs)
(Additional reporting by Laura Noonan in London, Angel
Krasimirov in Sofia and Radu Marinas in Bucharest; Writing by
Matthias Williams; Editing by Susan Fenton)