Bulgaria’s fourth largest bank set to collapse: customers line-up to pull deposits

July 2014 ECONOMICS – Bulgaria is to allow its fourth-biggest lender to collapse but could spend up to 2 billion levs ($1.39 billion) making sure customers do not lose out, as the Balkan country battles to clean up its worst financial scandal since the 1990s. The central bank said it was removing Corporate Commercial Bank’s (Corpbank) banking licence and would hive off its healthy activities into a separate bank, marking the first banking collapse since a 1996-1997 domestic financial crisis. The Bulgarian National Bank (BNB) is also alerting prosecutors to the possibility that the bank’s main shareholder stole almost 206 million levs just before the central bank took over its operations on June 20 after depositors withdrew about 1 billion levs. The bank run was prompted by media reports accusing top shareholder Tsvetan Vassilev of shady business deals. It spread quickly to another lender, forcing Sofia to set up a protective $2.3 billion credit line for its banks – a reminder that parts of Europe’s financial system are still far from secure despite progress from the worst days of the financial crisis. Vassilev has denied the allegations against him. “For several months now a massive, targeted and extremely manipulative campaign has started against me, which spilled over on everything associated with my name,” he told Bulgarian news agency BGNES, echoing comments he made previously to Reuters. But the results of an audit into Corpbank, showed “actions incompatible with the law and good banking practices,” BNB said. Auditors were unable to value about 65 per cent of Corpbank’s 5.4-billion-lev loan portfolio because crucial documentation was missing – “most likely destroyed in the days before the central bank sent administrators there,” the BNB added.
The results of the audit scotched earlier hopes of recapitalizing Corpbank with funds from existing shareholders. All of Corpbank’s good assets, and deposits not linked to Vassilev, will be moved to a unit of the bank called Credit Agricole – acquired by Corpbank from the French bank bearing the same name a week before the central bank took action – and Bulgaria plans to have this unit nationalized and re-opened on July 21. “We cannot continue to fill a barrel without a bottom, as the wise Bulgarian people say, and we cannot nationalize Corporate Commercial Bank in its current state,” the BNB said. Though the main bank will collapse, Finance Minister Petar Chobanov said the rescue could still cost between 1.5-2 billion levs, potentially swelling the country’s fiscal deficit this year to more than 3 per cent of gross domestic product (GDP) against a planned target of 1.8 per cent. The cost is so high because the authorities have vowed to repay all of the bank’s depositors except those linked to Vassilev. Corpbank’s financial statements show that depositors were owed almost 6 billion levs on March 31 – and since the bank may not get repayment on much of its loan books it has a substantial gap to fill. The BNB has not provided any figures more recent than that financial statement, nor said what proportion of the deposits were linked to Vassilev. It has said that prosecutors will have to determine whether his withdrawal of 206 million levs via a third party amounted to theft. Orlin Rusev, chairperson of the bank’s management board, was detained in the Black Sea resort of Sozopol on Friday in relation to Vassilev’s withdrawal of funds, prosecutors said. A second executive at the bank’s treasury department, Margarita Petrova, was charged with embezzlement in relation to the same withdrawals on Thursday. –Economic Times
This entry was posted in Age of Decadence, Apathy, Anger, Mistrust, Disillusionment, Austerity, Bank Run, Banking Crisis, Bankruptcy, Boom and Bust Cycles, Civil Unrest, Currency - Economic warfare, Economic Collapse, Fiat Money Printing Fiasco, Financial market turmoil, Greed and Corruption, Hierarchal Control, Infrastructure collapse, New World Order, Political Corruption, Political turmoil, Squandered Resources, The Pyramid Model, Troubled Banks, Unsustainable Debt Burden. Bookmark the permalink.

One Response to Bulgaria’s fourth largest bank set to collapse: customers line-up to pull deposits

  1. Dennis E. says:

    Your really need to have about 30 days of food and essentials stored if possible.
    It points to a total collapse of everything.
    America will be last.

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