* Five people now detained over bank runs
* Bulgaria warns of organised plot to destabilise banks
* Bulgarian banking sector seen as stable despite runs
* President expected to approve Oct 5 snap election date
By Gareth Jones
SOFIA, June 29 Bulgarian authorities said on
Sunday they had detained three more people on suspicion of
plotting to destabilise the country's banking system by
spreading false information about the health of its commercial
The arrests, which follow the detention of two men on
Saturday on the same grounds, are part of a criminal
investigation launched after depositors on Friday rushed to
withdraw savings from a second bank in the space of a week.
The run on First Investment Bank, Bulgaria's third
largest lender - which bankers and economists say is
well-capitalised - prompted the central bank to warn of a
deliberate and systematic attack on the banking sector.
Last weekend, the central bank took over Bulgaria's fourth
largest lender, Corporate Commercial Bank (Corpbank),
after customers, who were rattled by online and media reports of
suspect deals involving the bank, rushed to withdraw their
savings. The bank has denied any wrongdoing.
The run on Corpbank has shone a light on weak economic
governance in Bulgaria which joined the European Union in 2007
but remains its poorest member state and one of its most
On Friday, leaders of the main political parties set Oct. 5
as the date for a snap parliamentary election, putting an end to
weeks of political uncertainty that has coincided with the bank
Prime Minister Plamen Oresharski's Socialist-led minority
government is expected to resign shortly. In power for barely a
year, it has been plagued from the start by mass street protests
and allegations of graft and has been unable to enact reforms
urgently needed to revive a sluggish economy.
BANKING SYSTEM "STABLE"
Party leaders were due to begin consultations with President
Rosen Plevneliev at 2 pm (1100 GMT) on Sunday on how to maintain
political and economic stability until the election.
The president, a largely ceremonial figure who nevertheless
has an important role to play at times of political instability,
is expected to approve the election date. He may also appoint a
caretaker administration once the Oresharski cabinet resigns.
Plevneliev, Oresharski and the central bank have all urged
Bulgarian citizens to stay calm and to have faith in the
integrity of the country's banking system.
Despite its political and economic problems, Bulgarian and
international economists say the Balkan country of 7.5 million
people is not in danger of an economic meltdown.
Bulgaria has one of the lowest levels of debt in the EU, its
central bank is widely viewed as effective and well-run and the
lev currency is tied to the euro via a currency board, which
means it is shielded from turmoil in financial markets.
One of the men detained on Saturday over the bank runs, a
resident of the Danube city of Ruse, had called for the
scrapping of the currency board, the national security agency
However, there is a broad national consensus in Bulgaria on
the role of the board as a bulwark of stability. It was
introduced in the mid-1990s after a financial crisis triggered
hyper-inflation and wiped out many of the country's banks.
"The banking system is stable and there is no need of a new
loan from the International Monetary Fund at the moment," Petar
Ganev of the Sofia-based Institute for Market Economics said.
"The credit rating of the country remains high despite the
current panic ... Bulgarian banks maintain liquidity, which is
higher even than European banks. It is below 10 percent in
Europe while some banks in Bulgaria have 20 percent liquidity,
which is why the First Investment Bank was able to cope in this
critical situation and to pay out 800 million levs in one day."
"The most important thing at the moment is for people to
defy deliberately engineered mass panic and to avoid aggravating
the situation," said Ganev.
(Additional reporting by Angel Krasimirov; Editing by Andrew