* Fewer queue to withdraw savings from third-largest bank
* President says no reason to panic, bank savings are safe
* Central bank sees organised assault on banking system
* Central bank cuts collateral requirements for bank funding
* $2.3 bln credit line for banks gets European Commission
(Adds central bank announcements, analyst comment, changes
By Angel Krasimirov and Gareth Jones
SOFIA, June 30 Bulgaria's banking crisis eased
on Monday, with fewer depositors queuing to withdraw savings
after politicians assured them that their cash was safe and the
European Commission gave Sofia the green light to provide state
aid to its lenders.
Bulgarians had flocked to branches of First Investment Bank
on Friday and withdrew 800 million levs ($560 million)
after a run had shut down another big lender. The central bank
said criminals had tried to disrupt the financial system.
The authorities appealed for calm and arrested four people
suspected of sending emails and mobile phone messages containing
false information about the health of Bulgaria's banks.
Queues still formed outside branches of First Investment
Bank, but they were smaller than Friday's and by lunchtime they
had disappeared in central Sofia.
Approval of Sofia's request to provide 3.3 billion levs
($2.3 billion) in state aid - a precautionary measure - helped
shares in First Investment Bank rise 27 percent, reversing
Echoing the International Monetary Fund, the EU executive
also said the Bulgarian banking system was "well capitalised" -
comments that also helped to soothe the situation.
"People have clearly calmed down, which was to be expected
after all the statements," said Petar Ganev of the Sofia-based
Institute for Market Economics.
"However, there are still risks of new attacks against the
banking system as no doubt this was a well-prepared attack ... I
hope people, including the politicians, have learned from all
this because it is essential to restore confidence," he said.
To ease pressure on liquidity at Bulgarian lenders, the
central bank separately announced a cut in the collateral
requirements for banks getting access to local currency funding,
to 110 percent from 125 percent of the funding requested.
The central bank cannot extend credits to banks unless there
is a liquidity risk to the stability of the banking system. Such
loans cannot be extended for more than three months and need to
be backed with gold, foreign currency or other high-liquidity
assets as collateral.
In a second announcement, the bank also said that jitters
over the health of Bulgaria's banks had eased as a result of the
measures taken since Friday's bank run, adding that Bulgaria's
banking sector was functioning normally.
President Rosen Plevneliev urged Bulgarians to keep faith
with the banks in a national appeal on Sunday after emergency
talks with political party leaders and central bank officials.
"There is no cause or reason to give way to panic,"
Plevneliev told a news conference. "There is no banking crisis -
there is a crisis of trust and there is a criminal attack."
First Investment Bank declined to comment on how much money
had been withdrawn on Monday, but the bank has said it has
enough funds to meet customers' demand.
Earlier, a woman in her 60s who gave her name only as
Gergana invoked Bulgaria's last big financial crisis of 1996-7,
which sparked hyperinflation and the collapse of 14 banks.
"I am here because I remember what happened nearly 20 years
ago," she said.
Another customer, who gave his name only as Ivan, said he
would move his savings to a foreign-owned bank.
About two-thirds of Bulgaria's banks are now foreign-owned,
in sharp contrast to the mid-1990s.
There were no queues of depositors outside other Bulgarian
banks in central Sofia on Monday.
Last week, the central bank took control of Bulgaria's
fourth biggest lender, Corpbank, whose clients include many
state companies, after depositors rattled by media reports of
suspect deals involving the bank rushed to withdraw their
The central bank and economists said Corpbank was a special
case. Corpbank has denied any wrongdoing.
The central bank also announced on Monday it would cut
interest rates for depositors at Corpbank, which has shut down
operations until July 21, to market levels, without offering
Before shutting down, Corpbank had offered interest rates on
deposits of around 6-7 percent, compared with a country average
of 3-4 percent, said Desislava Nikolova, a financial analyst
with an online financial advisory network.
"The bank was offering interest rates often double the
market level, so the central bank decision is not surprising,"
SNAP ELECTION DATE
The crisis has rattled Bulgaria's fractious political class,
forcing it to bury differences at a time of political
uncertainty. On Friday, they agreed Oct. 5 as the date for a
snap election, which was promised after May's European
Prime Minister Plamen Oresharski's minority cabinet, dogged
by street protests and charges of graft since it took power
barely a year ago, said it would resign soon, after its main
coalition partner, the Socialists, did badly in the EU vote.
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 IMF and
economists have praised the stability of Bulgaria's banking
system and state finances.
It has some of the lowest public debt in the EU, at about 18
percent of national output, and the lev is tied to the euro via
a currency board, which is backed by a broad national consensus
as a bulwark of stability. It was introduced in the 1990s
Although the cost of insuring Bulgarian government debt rose
last week, Sofia managed to offer for sale a 1.5 billion-euro
bond last Thursday - a fact Finance Minister Petar Chobanov said
showed "the stability of the banking and financial systems".
($1 = 1.4331 Bulgarian levs)
(Additional reporting by Tsvetelia Tsolova; Editing by Matthias
Williams, Larry King)