Bulgaria banks under attack: Central bank

June 28, 2014 - 12:00:00 am
People queue outside a branch of Bulgaria’s First Investment Bank, in Sofia, yesterday. 

SOFIA: Bulgaria’s central bank said yesterday there was a systematic attempt to destabilise the country through attacks on the banking system and vowed to protect citizens’ savings.

Depositors queued in the capital Sofia to withdraw funds from one of the country’s biggest banks and its shares slumped, worsening a crisis that has shone a light on weak economic governance in the poorest European Union state.

Last week, the central bank took control of Corporate Commercial Bank (Corpbank) after a run on deposits sparked by media reports of suspect deals involving the bank and its top shareholder.

The central bank said Corpbank’s problems were isolated.  Economists and Fitch Ratings agency also played down the risk of contagion, while foreign banks with subsidiaries in Bulgaria insisted their operations were safe.

But the crisis spread on Friday as the country’s third-biggest lender, First Investment Bank, said it was under an “unprecedented criminal attack”.

Reuters witnesses saw queues of between 15 and 30 customers build gradually after some bank branches opened on Friday in Sofia. By early afternoon, there were around 70 people queuing outside one central branch of First Investment Bank.

The bank said depositors withdrew about 800m levs ($555.88m) and announced it would close all branches at 1200 GMT until Monday for “logistical reasons”. It said it had enough funds to meet clients’ demands.

A spokesman said Internet banking services and cash machine withdrawals would continue to function over the weekend.

“I was told to come here and take my money out,” said a 32-year old woman in one bank queue who did not want to be named. “I hope they do not close the doors in front of our noses.”

Interior Minister Tsvetlin Yovchev said the government was investigating attempts to destabilise the banking system. He said there had been a concerted phone and Internet campaign to spread rumours about other banks.

Prime Minister Plamen Oresharski said there was no cause for concern. On Friday, leaders of the main political parties set October 5 as the date for a snap parliamentary election, putting an end to weeks of political uncertainty that has coincided with the bank runs.

“The risk of a widespread run on banks increases in a situation like this, and it’s pretty important that the authorities are on top of things,” said Lars Christensen, chief emerging markets analyst at Danske Bank.

The crisis has knocked an already weak economy and revived concerns about persistent corruption in the country, which joined the EU in 2007. Many Bulgarians who lost money in a banking sector meltdown in the late 1990s are wary of official assurances that their savings are safe.

Both Corpbank and its biggest investor, Bulgarian businessman Tsvetan Vassilev, have denied any wrongdoing.

Comments on Thursday by a deputy from the ruling Socialist Party that another bank may suffer a similar fate to Corpbank accelerated the steep declines in Bulgarian bank stocks.

The lawmaker, Anton Kutev, told Nova TV he thought there had been a deliberate attempt to “break” Corpbank and that “someone is trying to pull down another bank, as far as I feel”. He did not say who might be trying to take such action.

“In recent days there has been an attempt to destabilise the state through an organised attack against Bulgarian banks without any reason,” the central bank said in a statement. It said First Investment Bank had been a major target.

The central bank urged all state institutions to work together to protect financial stability and take legal action against those spreading “untrue and ill-intentioned rumours” about the health of Bulgaria’s banks.

Reuters

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