Run on bank prompts Bulgarian central bank to seize control

People queue outside the main office of Corpbank. — Reuters pic
People queue outside the main office of Corpbank. — Reuters pic

SOFIA, June 20 — A run on Corporate Commercial Bank (Corpbank) prompted Bulgaria’s central bank to take control of the country’s fourth-largest lender today and its governor begged depositors to stay calm, saying: “Let’s not tear down our house”.

The Bulgarian National Bank said it had taken control of Corpbank’s operations for a period of three months and removed its management and supervisory board, but stressed it was not bankrupt.

A Reuters photographer saw dozens of people queuing outside the main office of the bank in the Bulgarian capital today.

The central bank said the run on the lender was triggered by adverse media reports, and that it acted after receiving information from Corpbank this morning that it had stopped all payments and bank operations due to a liquidity drain.

“As you know, there has been a lot of talk about the bank and one of its shareholders, which triggered bank runs,” central bank governor Ivan Iskrov said at a news conference. “It is very important to be very careful when we talk about banks. Let’s not tear down our house alone unnecessarily.

“Let me make this very clear. Corporate Commercial Bank is not a bankrupt bank. We are acting swiftly to avoid a bankruptcy,” said Iskrov.

He declined to give further details of the bank’s problems and said bank supervisors would carry out a full audit of its books.

Bulgaria’s stock exchange said it had suspended Corpbank from trading until the end of the session today, after which it would see if the suspension needed to be prolonged.

Iskrov said the banking system was not so interlinked that Corpbank’s situation would affect other commercial banks in the country.

There are 29 commercial banks operating in Bulgaria and about three-quarters of the banking system’s assets are foreign-owned. Among foreign banks with operations in Bulgaria are Unicredit, Raiffeisen Bank, Hungary’s OTP, National Bank of Greece, EFG and Alpha Bank.

Bulgarian bank deposits in local and foreign currency are guaranteed up to 196,000 levs (RM438,750), or €100,000 by law.

The central bank would audit Corpbank’s books then launch talks with shareholders to calculate the support the bank would need, Iskrov said. — Reuters