* President says no reason to panic, bank savings are safe
* Central bank sees organised assault on banking system
* Bulgaria to hold snap parliamentary election on Oct. 5
By Gareth Jones
SOFIA, June 30 Bulgaria's leaders have appealed
to citizens not to panic and withdraw their savings when banks
reopen on Monday, following runs on two major lenders that have
raised concerns for the Balkan country's financial stability.
The runs on Corporate Commercial Bank (Corpbank)
and First Investment Bank, Bulgaria's fourth and third
largest lenders respectively, pose the biggest challenge for the
European Union's poorest member state in nearly two decades.
The central bank has said there is a deliberate and
systematic attempt to destabilise Bulgaria's banking system and
has vowed to take all measures to protect citizens' savings. Law
enforcement officials have launched a criminal investigation.
"There is no cause or reason to give way to panic. There is
no banking crisis, there is a crisis of trust and there is a
criminal attack," President Rosen Plevneliev said on Sunday
after more than four hours of emergency talks with the leaders
of Bulgaria's main political parties and central bank officials.
"These need to be overcome and those responsible prosecuted
to the fullest extent of the law," he told a news conference.
The national security agency said it had arrested five
people suspected of spreading false information about the health
of banks by sending random emails and mobile phone messages to
customers. It later released one of the five.
Last week the central bank took control of Corpbank, whose
clients include many state companies, after depositors rattled
by media reports of suspect deals involving the bank rushed to
withdraw their savings. The bank has denied any wrongdoing.
The central bank and economists said Corpbank was a special
case and contagion to other banks would be limited. But on
Friday depositors queued outside branches of First Investment
Bank to withdraw their money. Its share price lost 24 percent.
The bank closed its branches on Friday afternoon citing
logistical problems but said it had enough funds to meet
customers' demand and said it would re-open as normal on Monday.
The bank runs have coincided with a period of great
Prime Minister Plamen Oresharski's minority cabinet, dogged
by charges of graft and street protests since it took power
barely a year ago, said it would soon resign after the main
coalition partner, the Socialists, did badly in EU elections.
It has agreed to a snap parliamentary election on Oct. 5.
Plevneliev said on Sunday he would dissolve parliament and
appoint an interim government on Aug. 6, after Oresharski's
resignation, to steer Bulgaria until the election.
Despite its political and economic woes, the International
Monetary Fund and economists have praised the stability of
Bulgaria's banking system and its solid state finances.
It has one of the lowest debt levels in the EU, banks are
well capitalised and the lev currency is tied to the euro via a
currency board, which means it is shielded from the turmoil.
There is a broad national consensus in Bulgaria on the role
of the currency board as a bulwark of stability. It was
introduced in the mid-1990s after a financial crisis triggered
hyper-inflation and wiped out 14 banks.
"The currency board is unshakeable," Plevneliev said on
Sunday, adding it would remain till Bulgaria joins the eurozone.
Another factor in Bulgaria's favour is the fact that about
two thirds of its banks are now foreign-owned and can call on
help from parent banks abroad if necessary.
"The credit rating of the country remains high despite the
current panic ... Bulgarian banks maintain liquidity that is
higher even than European banks ... This is why First Investment
Bank was able to cope in this critical situation and to pay out
800 million levs ($558 million) in one day (on Friday)," said
Petar Ganev of the Sofia-based Institute for Market Economics.
($1=1.4328 Bulgarian levs)
(Editing by Greg Mahlich)