The fate of Bulgaria’s Corporate Commercial Bank, which experienced a run last month, has become murkier after officials failed to agree on a rescue plan, prolonging the nation’s worst banking crisis since the 1990s.
The bank, known as KTB, was initially set to reopen yesterday, but is to remain closed as officials continue to wrangle over whether the state should bail it out or find private investors to save it.
Bulgaria is grappling with its worst banking crisis since 1996, when more than a dozen lenders went bankrupt. The tumult at KTB, one of the nation’s largest banks, quickly spread to another lender — First Investment Bank. Its panicked depositors withdrew the equivalent of US$553 million in hours on June 27.
Unlike KTB, First Investment Bank remained open after assurances of support from the government.
EUROPEAN REVIEW
The Bulgarian authorities announced last week that they would seek a review by the European Banking Authority. The country has also asked to join the EU’s Single Supervisory Mechanism, which was set up in response to the continent’s debt crisis.
Bulgaria would be the first nation outside the 18-country eurozone to join the mechanism, under which its banks would be overseen by the European Central Bank.
The Bulgarian National Bank, the nation’s central bank, assumed control of KTB on June 20, after more than a fifth of its deposits were withdrawn in a week.
The central bank had planned to let KTB collapse and move its healthy assets into a subsidiary, Credit Agricole Bulgaria, which KTB acquired from the French banking giant Credit Agricole a week before the run.
Credit Agricole Bulgaria was to be recapitalized and nationalized, allowing it to reopen yesterday.
However, last week, the Bulgarian National Assembly rejected the government’s US$1.37 billion bailout plan because it involved raising new debt and increasing the nation’s budget deficit this year to close to 3 percent of GDP. The government quickly started pursuing a bank rescue by its shareholders.
OMAN FUND
On Friday, Bulgarian Minister of Finance Petar Chobanov asked Oman’s sovereign wealth fund to help save KTB. The fund holds a 30 percent stake in the bank.
“State institutions will intervene” in rescuing the bank “if the shareholders had no success,” the Bulgarian Ministry of Finance said in a statement after Chobanov spoke by telephone with Omani fund chief executive Abdul Salam al-Murshidi.
“Finding a private solution of the problem that does not require public resources is the most desired exit from the current situation,” he added.
The ministry did not provide details about the conversation.
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