Sun, Jun 29, 2014 - Page 13 News List

Destabilizing assaults on Bulgarian banking system

Reuters, SOFIA

Bulgaria’s central bank said on Friday there was a systematic attempt to destabilize 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 EuropeanEU 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 played down the risk of contagion, while foreign banks with subsidiaries in Bulgaria — accounting for more than two-thirds of the Balkan country’s banking system — insisted operations were safe.

Yet 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 about 70 people queuing outside one central branch of First Investment Bank.

The bank said depositors withdrew about 800 million levs (US$555.88 million) and it 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.”

Bulgarian 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.

“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.

Bulgarian Finance Minister Petar Chobanov told state TV late on Friday the government was working closely with the central bank and political parties to contain the crisis.

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