Bulgaria's fourth-largest bank seeks insolvency protection

Bulgaria's fourth-largest bank seeks insolvency protection
People queue outside the main office of Bulgaria's Corporate Commercial Bank in Sofia June 20, 2014.

SOFIA - Bulgaria's fourth-largest private bank, under a cloud of accusations it engaged in dodgy lending, halted payments on Friday after a run on its funds and sought insolvency protection.

Doubts about the soundness of Corporate Commercial Bank (CCB), majority-owned by a controversial businessman, were sparked this week after police raided its headquarters and questioned of 12 top managers.

On Wednesday the deputy governor of the central bank in charge of supervising lenders was indicted for alleged abuse of office and failure to act when CCB far exceeded the limit for bad loans after it loaned money to firms associated with its tycoon owner, Tsvetan Vasilev.

"In order to protect the interests of its depositors and clients, CCB decided to seek institutional support from the BNB (central bank)... proposing to the central bank to place CCB under special supervision due to insolvency risk," CCB said in a statement Friday.

It cited "an unprecedented campaign against the bank that involved the judiciary" as the reason behind its decision.

The central bank said CCB had informed it the lender "had exhausted its liquidity and discontinued payments and all sorts of bank operations."

The BNB had issued a statement on just on Wednesday saying that "the banking system, including CCB, has high liquidity, adequate capital and functions normally." But this failed to prevent a run and CCB faced "a fast withdrawal of huge liquidity " in the past days, BNB Governor Ivan Iskrov said Friday.

He tried to calm depositors.

"The bank is not bankrupt. It is closed and under the control of the BNB," he said.

CCB shareholder rights have been suspended for three months and administrators were appointed to try and get the bank back on its own feet, Iskrov added.

CCB is the fourth-largest private lender with total assets topping 7.3 billion leva (S$6.25 billion) in the first quarter of 2014, or 8.4 per cent of total Bulgarian private banking assets.

Dozens of worried depositors were queueing outside CCB's headquarters, with memories still fresh for many Bulgarians of a series of bank runs that claimed 14 lenders in 1996-1997.

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