* No action on Corpbank before audit results: source
* Interim government to seek EU banking supervision: source
* Interim government to push euro zone entry: source
By Matthias Williams and Tsvetelia Tsolova
SOFIA, July 25 (Reuters) - The dollar bonds of Bulgaria’s Corporate Commercial Bank look set to default on their Aug. 8 maturity date with no way found to rescue the lender so far, a source familiar with the situation said on Friday.
The government resigned on Wednesday without reaching an agreement with lawmakers about how to rescue the lender, which was hit by a run on deposits in June. Parliament earlier in July rejected a proposed rescue package and has a rapidly shrinking window to approve one before it is dissolved on Aug. 6.
Barring any dramatic late developments, such as one of Corpbank’s shareholders offering to step in, the prospect of a default on the bond has looked increasingly likely.
There are no quick fixes for Bulgaria’s banking crisis and authorities won’t be able to decide on whether and how to save the lender until the results of an audit into Corpbank’s books are known around the middle of September, the source said.
“The bank is closed. The bond will go into default,” said the source, who declined to be named because of Bulgaria’s current political sensitivities. “It is quite clear that on Aug. 8 there cannot be any payment because everything is frozen. The bank is not going to open before that date.”
The source offered an early glimpse of how President Rosen Plevneliev will tackle the Balkan state’s worst banking crisis since the 1990s, when he appoints an interim government in August for two months ahead of a snap election in October.
The interim government will speed up a process to put Bulgarian banks under European supervision - the first non-euro zone country to want to do this - and also accelerate efforts for Bulgaria to join the euro, the source said.
Clients unnerved by reports of shady deals by Corpbank’s main owner withdrew more than a fifth of deposits in a week-long bank run in June, forcing the central bank to take control of the lender, shut down its operations and order an audit.
The owner, who was locked in a public feud with a rival at the time of the run, has repeatedly denied any wrongdoing and said the run was a plot hatched by his competitors.
The crisis has put renewed scrutiny on the investment climate in the poorest and one of the most corrupt economies in the European Union, which has suffered a sharp fall in foreign investment and a sovereign credit-rating downgrade in June.
The central bank and Prime Minister Plamen Oresharski’s government, which stepped down this week, have pursued various options for rescuing Corpbank, including hiving off its good assets and liabilities into a subsidiary.
But a proposed rescue package, which needs the approval of parliament, was rejected by lawmakers in July. That has left Corpbank’s fate in limbo and raised questions about to what extent the its depositors and bondholders will be protected.
“Everybody now agrees that no action should be taken until there is a clear due diligence to estimate the gap in the capital of the bank,” the source said.
“Whether the bank will be liquidated or saved will depend on how big the loss is.”
The central bank was not immediately available for comment.
A failure to protect bondholders of the country’s no. 4 lender would send a strong deterrent message to investors, which in turn could push up the cost of raising both sovereign and corporate debt.
The fate of the $150 million bond will be determined by what happens to Corpbank, the source said. For example, if Corpbank is allowed to collapse, its assets could be sold to help pay or partially repay the holders.
Oresharski’s minority coalition government stepped down on Wednesday after just over a year in office. There is now a shrinking window before parliament is dissolved on Aug. 6 for lawmakers to approve measures such as raising new sovereign debt to finance Corpbank’s rescue.
The central bank originally intended to reopen Corpbank on July 21, and its governor subsequently blamed a lack of political consensus on the rescue for derailing the deadline.
Preliminary results of an audit carried out by E&Y, Deloitte and a local consultancy showed activities in the bank “incompatible with the law and good banking practices”, according to the central bank. It also said that crucial information about Corpbank’s loan portfolio was missing. (Editing by Ruth Pitchford)