Bulgaria ready to rescue Corpbank after bank run

People queue outside the main office of Bulgaria’s Corpbank in Sofia. The central bank said it would ask independent auditors to provide a full assessment of Corpbank group’s assets and liabilities within ten days.

Reuters/Sofia

Bulgaria is ready to rescue Corporate Commercial Bank (Corpbank) by injecting capital and enforcing losses on shareholders, the central bank said yesterday, after a run on the country’s No. 4 lender prompted the central bank to take it over on Friday.

The central bank said the government was also prepared to inject capital into a subsidiary that Sofia-listed Corpbank recently bought from France’s Credit Agricole and which has been taken over by the central bank as well.

It was not immediately clear how much capital would be needed to prop up Corpbank – which had loans of almost 5bn levs ($3.5bn) as of March, and capital of 622mn levs – and the subsidiary. The central bank said it would ask independent auditors to provide a full assessment of Corpbank group’s assets and liabilities within ten days. Corpbank and its subsidiary will re-open on July 21, the central bank added. The case marks the first rescue of a Bulgarian bank following a financial crisis which has seen EU states pump more than 5tn euros ($6.8tn) into ailing lenders including Spanish No.4 Bankia, Ireland’s AIB and Permanent TSB, Britain’s Royal Bank of Scotland , and Greece’s four largest banks. The Bulgarian central bank on Friday took control of Corpbank for three months while pleading with depositors – many of them queuing up outside Corpbank branches – not to panic.

The bank run started after media reports of suspect deals involving the bank and its top shareholder. Eager to avoid panic spreading to other Bulgarian lenders, government ministers have urged people to stay calm and stressed Corpbank’s problems were an isolated case. On Saturday the deputy prime minister said citizens would “not lose a single lev” as a result of Corpbank’s problems.

The crisis is another headache for Prime Minister Plamen Oresharski’s minority government, which has struggled to revive economic growth.