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Rumors, withdrawals destabilize Bulgarian banking system

A run on deposits began after one bank was taken over by the state for internal and isolated issues.
By Ed Adamczyk   |   June 27, 2014 at 4:57 PM   |   Comments

SOFIA, Bulgaria, June 27 (UPI) -- The Bulgarian central bank announced what it terms a systematic attempt to destabilize the country's banking system.

A run on deposits at Bulgaria's fourth-largest bank, Corporate Commercial Bank -- in which depositors withdraw their money at once -- occurred after the bank was taken over by the central bank, in what the central bank called isolated internal problems. Foreign banks with Bulgarian subsidiaries claim their affiliates do not suffer similar problems.

There is speculation, though the run on deposits at Corporate Commercial Bank could spread to other banks, and the value of shares in Bulgaria's First Investment Bank fell 23 percent Friday. The value of other bank investments fell as well. In addition, customers of First Investment Bank could be seen lining up to withdraw funds Friday at the bank's headquarters in Sofia.

First Investment Bank withdrew 800 million lev ($558.1 million) in a matter of hours Monday, the bank said.

The central bank said in a statement:

"In recent days there has been an attempt to destabilize the state through an organized attack against Bulgarian banks without any reason."

It also mentioned "untrue and ill-intentioned rumors" regarding the durability of the Bulgarian banking system.

"The whole banking sector is being sold off due to the problems around Corporate Bank. Investors are worried the problems can spread," said Boyan Gatsev of Varchev Finance.

Follow @adamczyk_ed and @UPI on Twitter.
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