Bulgarian central bank says banking system under attack

SOFIA, (Reuters) – Bulgaria’s central bank warned today of a systematic attempt to destabilise the country through attacks on the banking system and vowed to use everything at its disposal to protect citizens’ savings.

Shares in Bulgarian banks fell sharply for a second day on speculation that a run on deposits at the country’s fourth-biggest bank, Corporate Commercial Bank (Corpbank) , could spread to other lenders and shake Bulgaria’s already weak economy and those of its neighbours.

The central bank took control of Corpbank last week and said its problems were isolated. Economists and Fitch Ratings agency have also played down the risk of contagion, while foreign banks with subsidiaries in Bulgaria insist their operations are safe.

But comments by a deputy from the country’s ruling party on Thursday that another bank may suffer a similar fate further jolted confidence and left investors scrambling to ditch Bulgarian bank stocks.

“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.

Interior Minister Tsvetlin Yovchev said the government was investigating attempts to destabilise the banking system. Prime Minister Plamen Oresharski said there was no cause for concern.

Reuters witnesses saw queues of between 15 and 30 customers build gradually after some bank branches opened on Friday in the capital Sofia.

By late morning, 65 people were queuing outside a central branch of First Investment Bank, with a further 12 queueing at one of the bank’s ATM cash machines.

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

Shares in First Investment Bank were down 23 percent as of 0926 GMT. Bulgaria’s third-largest bank said on Friday it had not imposed any restrictions on operations and would shortly publish a statement.

Other bank shares were also down sharply.

“The whole banking sector is being sold off due to the problems around Corporate Bank. Investors are worried the problems can spread,” said Boyan Gatsev, a trader with Varchev Finance.


Although the cost of insuring Bulgarian government debt rose last week, the government has managed to launch a 1.5 billion euro bond sale needed to roll over existing bonds and finance the budget deficit.

But the bank run, sparked by media reports of suspect deals involving Corpbank and its top shareholder, has revived painful memories of a sector meltdown in the 1990s that bankrupted 14 banks, and comes at a bad time for a minority government that has struggled to revive economic growth and stem a sharp drop in foreign investment.

The affair has highlighted persistent concerns about poor governance and shadowy ties between state officials and private business in Bulgaria, which joined the European Union in 2007 but remains its poorest member state and one of the most corrupt.

Ongoing political instability prompted Standard and Poor’s to downgrade Bulgaria’s sovereign credit rating to one notch above junk earlier in June.

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

The chief executive of Greece’s National Bank said it had not seen any deposit outflows at its unit in Bulgaria. “NBG’s subsidiary in Bulgaria does not have any exposure whatsoever to Corporate Commercial Bank,” Alexandros Tourkolias told Reuters.

Socialist lawmaker Anton Kutev told Nova TV on Thursday 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 its statement, the central bank condemned what it called “criminal actions (that are) directly aimed at the savings of all Bulgarian citizens and financial stability as an essential element of national security”.

In the latest of successive government attempts to calm bank depositors and investors, prime minister Oresharski issued a statement on Friday saying Bulgarians had no grounds for concern.

“The country has sufficient tools (to deal with the situation),” he said. “We will support all efforts of the central bank … not to allow any shaking of public trust in one or other institutions.”

Latest in World News

Mario Draghi

EU leaders tell Britain to exit swiftly, markets steadier

LONDON/BRUSSELS, (Reuters) – European leaders told Britain yesterday to act quickly to resolve the political and economic confusion unleashed by its vote to leave the European Union last week, after the IMF said the uncertainty could put pressure on global economic growth.

default placeholder

Suspected Islamic State suicide bombers kill 36 at Istanbul airport

ISTANBUL, (Reuters) – Three suicide bombers opened fire then blew themselves up in Istanbul’s main international airport yesterday, killing 36 people and wounding close to 150 in what Turkey’s prime minister said appeared to have been an attack by Islamic State militants.

default placeholder

Libya wealth fund boss screamed, cursed at Goldman bankers -witness

LONDON, (Reuters) – The Libyan wealth fund’s former deputy chief screamed and cursed at Goldman Sachs bankers in a stormy meeting over derivatives trades made on the bank’s advice that ultimately turned out to be worthless, a witness told a court yesterday.

default placeholder

Toyota recalling 1.43 million hybrids worldwide for air bag issue

WASHINGTON, (Reuters) – Toyota Motor Corp said late yesterday it is recalling 1.43 million hybrid Prius and Lexus CT200h cars worldwide because of a possible airbag inflator defect.

George Osborne

Brexit vote, UK political confusion rattles world markets for second day

LONDON (Reuters) – Britain’s vote last Thursday to leave the European Union continued to reverberate through financial markets yesterday, with the pound falling to its lowest level in 31 years, despite government attempts to relieve some of the confusion about the political and economic outlook.

default placeholder

Turkey mends fences with Israel, Russia in foreign policy reset

ISTANBUL/MOSCOW/JERUSALEM (Reuters) – Turkey announced the restoration of diplomatic ties with Israel yesterday after a six-year rupture and expressed regret to Russia over the downing of a warplane, seeking to mend strained alliances and ease a sense of isolation on the world stage.

default placeholder

Kerry raises harassment of US diplomats in Moscow with Putin

WASHINGTON (Reuters) – Russian harassment and surveillance of US diplomats in Moscow has increased significantly and US Secretary of State John Kerry raised the issue recently with Russian President Vladimir Putin, the State Department said yesterday.

Boris Johnson

British EU vote unnerves world leaders and markets

LONDON,  (Reuters) – Britain plunged deeper into political crisis yesterday after its vote to exit the European Union last Thursday, leaving world officials and financial markets confused about how to handle the political and economic fallout.


About these comments

The comments section is intended to provide a forum for reasoned and reasonable debate on the newspaper's content and is an extension of the newspaper and what it has become well known for over its history: accuracy, balance and fairness. We reserve the right to edit or delete comments which contain attacks on other users, slander, coarse language and profanity, and gratuitous and incendiary references to race and ethnicity.

Stay updated! Follow Stabroek News on Facebook or Twitter.

Get the day's headlines from SN in your inbox every morning: