June 21, 2014 / 3:00 PM / 4 years ago

Bulgarian government reassures depositors after bank run

SOFIA, June 21 (Reuters) - Bulgarians will not lose any money after this week’s run on Corporate Commercial Bank (Corpbank), the deputy prime minister said on Saturday, looking to reassure depositors and urging people to stay calm.

A run on the Balkan state’s fourth-largest lender prompted the central bank to take control of Corpbank on Friday for a period of three months. It pleaded with depositors - many of them queuing up outside Corpbank branches - not to panic.

The run started this week after media reports of suspect deals involving the bank and its top shareholder. Both have denied any wrongdoing.

The run was an ugly reminder for Bulgarians of a domestic financial crisis in 1996-1997 that bankrupted 14 banks and forced the introduction of a currency board regime.

It also poses another challenge to Prime Minister Plamen Oresharski’s government, which has struggled to revive economic growth and is expected to step down shortly following a poor showing at the European Parliament elections in May.

Bulgarian bank deposits in local and foreign currencies are guaranteed up to 196,000 levs ($136,600), or 100,000 euros, by law. The central bank will open talks with shareholders to calculate the support the bank will need, it said on Friday.

“The Bulgarian government supports the actions of the Bulgarian National bank. We will not allow the citizens to lose a single lev,” Deputy Prime Minister Daniela Bobeva said on radio on Saturday. The lev is the Bulgarian currency.

“People should remain calm,” she said.

Bobeva also played down the impact of the bank run on state-run companies that have accounts with Corpbank, chiefly in the energy sector. She pointed out that a rule change limits the amount of money a state company can keep in one bank.

That rule change means state companies hold about 130 million levs in the bank, compared with 700 million levs when Oresharski’s government came to office last year.


The leading shareholders in the Sofia-listed bank are Bulgarian businessman Tsvetan Vassilev, with just over half the company; Oman’s sovereign wealth fund, with around 30 percent; and Russia’s VTB Asset Management, with nearly 10 percent.

The central bank governor said depositors in the bank stepped up withdrawals after an anonymous letter was leaked to media that said the central bank’s deputy governor in charge of banking supervision was being investigated by prosecutors for abuse of office. Bulgarian media linked the investigation of the deputy governor to allegations of corruption at Corpbank.

The central bank has since confirmed the investigation and said the deputy governor had taken a voluntary leave of absence.

Bulgarian tobacco company Bulgartabac, one of the bank’s prominent clients, also announced earlier this week it was taking its accounts out of the bank.

Finance Minister Petar Chobanov on Friday night told a local TV station he hoped the central bank’s control over Corpbank would be shorter than three months.

“We expect things to develop faster. You see that talks with the shareholders are starting and they are serious - with VTB Bank and the Omani Fund. We will see what exactly their intentions are,” he said.

“There is no risk for our banking system as timely actions were undertaken, which guarantee the stability and the protection of the depositors at Corporate Commercial Bank.”

“The state stands behind the actions of the central bank. The aim is to recover and stabilise the bank. This is an isolated case and by no means influences the whole banking system.” (Editing by Matthias Williams)

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