* Central bank plans to extend control over the troubled
* Says bank posted loss, drop in capital adequacy at
* Prepares to ask shareholders to provide capital and
* Asks EBA to review its banking supervision division
(Adds request to EBA for a review, background)
By Tsvetelia Tsolova
SOFIA, July 31 Bulgaria's central bank will ask
independent auditors to carry out a thorough review of Corporate
Commercial Bank's (Corpbank) books until Oct. 20, it
said on Thursday, effectively extending its control over the
The central bank took control of Corpbank on June 20 for
three months following a bank run, which plunged the Balkan
country into its worst banking crisis since the 1990s. The
central bank proposed a rescue plan for Bulgaria's fourth
largest lender, which failed to get parliament's approval.
The central bank said it now plans to ask current
shareholders of Corpbank to express interest in whether they are
willing to provide capital and liquidity support. It said it
plans to extend its control over the bank beyond an initial
deadline of Sept. 21.
The central bank can keep a lender under its supervision for
up to six months under Bulgarian law.
Clients unnerved by reports of alleged shady deals involving
Corpbank's main owner Tsvetan Vassilev withdrew more than a
fifth of deposits in a week-long bank run in June, forcing the
central bank to shut down its operations.
Vassilev, 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.
A report by the central bank's administrators showed that
Corpbank's loan portfolio stood at 5.3 billion levs ($3.63
billion)at the end of June, while its deposits had dropped by
630 million levs from a month earlier to 5.6 billion levs.
The bank registered a loss of 65.3 million levs after having
to cover devaluations of its loans, the central bank said in a
statement, while its total capital adequacy ratio had dropped to
10.54 percent at the end of June, from 12.56 percent at the end
The central bank will ask Deloitte, EY and local
auditing firm AFA to carry out a full review of the bank's
assets, after their initial audit showed insufficient
information to value loans worth 3.5 billion levs. The initial
audit had indicated "activities incompatible with the law and
good banking practices", according to the central bank.
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
Central bank governor Ivan Iskrov has said he is prepared to
resign if politicians agree on a successor to lead the country
through the banking crisis - an option that has been abandoned
for now due to lack of political agreement.
On Thursday, the central bank said it had sent a letter to
the president of the European Banking Authority, inviting the
EBA to carry out "an independent review of the quality,
capacity, practices and procedures of the central bank's banking
Iskrov has said he expected such a review to be carried out
in the autumn.
Vassilev owns 50.6 percent of Corpbank, an Omani sovereign
wealth fund holds 30 percent and Russian VTB Bank owns
about 9 percent.
The Omani fund has said it and other shareholders were
seeking to stabilise the troubled bank, while VTB has said it
was not planning to extend support.
($1 = 1.4611 Bulgarian levs)
(Reporting By Tsvetelia Tsolova; Editing by Susan Fenton)