BULGARIA: Customers of Bulgaria's fourth-largest lender fume as their deposits remain blocked since June and the crisis feeds disillusionment with politicians

Record ID: 565593

  • Title: BULGARIA: Customers of Bulgaria's fourth-largest lender fume as their deposits remain blocked since June and the crisis feeds disillusionment with politicians
  • Date: 25th September 2014
  • Summary: SOFIA, BULGARIA (RECENT) (REUTERS) SOFIA CENTRE EXTERIOR CORPBANK HEADQUARTERS SIGN READING (Bulgarian): "CORPORATE COMMERCIAL BANK" MAN LOOKING AT LOCKED DOOR, WALKING AWAY CORPBANK HEADQUARTERS EXTERIOR "OPEN SOCIETY INSTITUTE BULGARIA" OFFICE GEORGI ANGELOV, ANALYST, SPEAKING TO JOURNALIST (SOUNDBITE) (Bulgarian) ANALYST, GEORGI ANGELOV, SAYING: "The Corpbank situation creates uncertainty in a big part of our society and our economy and any further delay of a solution gives grounds for damaging gossip." ANGELOV'S HANDS (SOUNDBITE) (Bulgarian) GEORGI ANGELOV, ANALYST, SAYING: "This is the main reason why all other EU countries rescue troubled lenders - not because they want to spend taxpayer's money, but because they do not want a contagion and a lack of confidence in the whole financial system." SOFIA, BULGARIA (SEPTEMBER 15, 2014) (REUTERS) PROTEST OF CORPBANK CUSTOMERS IN FRONT OF BULGARIAN CENTRAL BANK VARIOUS OF PROTEST WOMAN HOLDING POSTER, READING (Bulgarian): "WAKE UP PEOPLE, YOU ARE BEING ROBBED" (SOUNDBITE) (Bulgarian) CORPBANK CUSTOMER, IVANOV, SAYING: "They used to repeat day by day that our banking system was the most stable in the world. What happened? It turned out they lied." PROTESTER HOLDING POSTER, READING (Bulgarian): ENOUGH WITH THE MOCKERY, WE WANT OUR MONEY BACK" (SOUNDBITE) (Bulgarian) CORPBANK CUSTOMER, IVANOV, SAYING: "We should be ashamed that such things happen in a European Union country." MORE OF CORPBANK DEPOSITORS PROTEST (SOUNDBITE) (Bulgarian) CORPBANK CUSTOMER, IRENA GRANCHAROVA, SAYING: "I don't trust our banking system, I don't trust the state officials in my country. They all rushed to an election campaign, fighting for votes. They think we are the pawns who pay their bills, but we are citizens who want to know what they are going to do about the Corpbank crisis." PROTESTERS CHANTING "MAFIA" CENTRAL BANK WITH EUROPEAN AND BULGARIAN FLAGS
  • Embargoed: 10th October 2014 13:00
  • Keywords:
  • Location: Bulgaria
  • Country: Bulgaria
  • Topics: Finance
  • Reuters ID: LVABBRBTFUOICCQOJHO9JK0ICP9G
  • Story Text: Bulgarians are expected to choose a new parliament on October 5 but anger about inaction over Corpbank, the focus of Bulgaria's worst banking crisis since the 1990s, has left many in the country disillusioned with the ruling elites.
    The country's central bank took control of Corporate Commercial Bank (Corpbank) in June after a week-long run in which customers lined up to withdraw more than a fifth of deposits. This followed media reports of shady deals involving the bank.
    Efforts to come up with a rescue plan for the country's fourth biggest bank have stalled partly because of elections on October 5. The central bank has said it will keep control over Corpbank until mid November when the results of an audit by accountants Deloitte, EY and local firm AFA will be complete.
    Until then there is no clarity on whether authorities will rescue the bank or let it collapse, whether taxpayers will have to foot part of the bill, and how Corpbank's depositors and bondholders will be treated.

    "The Corpbank situation creates uncertainty in a big part of our society and our economy and any further delay of a solution gives grounds for damaging gossip," Georgi Angelov, an economist with Sofia-based Open Society institute, said.

    "This is the main reason why all other EU countries rescue troubled lenders - not because they want to spend taxpayer's money, but because they do not want a contagion and a lack of confidence in the whole financial system," Angelov added.
    Corpbank's troubles have not yet infected the wider financial sector in the country and the crisis has not escalated into a Cyprus-style situation that ultimately required a 10 billion euro international rescue.
    The Corpbank crisis has intensified Bulgarians' already high level of disillusionment with their political leaders, which could lead to a fractured vote on October 5 and another fragile government trying to implement reforms and sort out Corpbank.
    Angry depositors now protest weekly in the Bulgarian capital Sofia and elsewhere, demanding that the government and central bank reopen Corpbank where more than 6 billion levs ($3.98 billion) of their cash is locked up.

    "They used to repeat day by day that our banking system was the most stable in the world. What happened? It turned out they lied," said one of the demonstrators, Ivanov.

    "We should be ashamed that such things happen in a European Union country," he added.

    "I don't trust our banking system, I don't trust the state officials in my country," Irena Grancharova, a 62-year-old depositor at Corpbank, said.

    "They all rushed to an election campaign, fighting for votes. They think we are the pawns who pay their bills, but we are citizens who want to know what they are going to do about the Corpbank crisis."
    More than half of Bulgarians now fear new problems at banks, according to a poll by Alpha Research.
    Trade unions and industry bodies warn more than 60,000 jobs may be lost if Corpbank were pushed into insolvency. Municipalities have pleaded for interest-free loans from the government to tide them over while their deposits remain frozen.
    Bulgaria's Socialist-led government resigned in July after a year in office overshadowed by massive anti-corruption protests last year and the Corpbank crisis this year.
    The centre-right GERB party is ahead in opinion polls, but is unlikely to win an outright majority in the country's third election in less than two years.
    This may further hobble the European Union's poorest member state. The European Bank for Reconstruction and Development in September cut Bulgaria's growth outlook to 1.5 percent from 1.9 percent for 2014, mainly due to finance sector woes.
    Corpbank's biggest shareholder Vassilev has said the bank run was the result of a plot by rivals in collusion with state institutions. Vassilev, who has strongly denied any wrongdoing, surrendered to police in neighbouring Serbia this month on charges of embezzlement. He was not immediately available to comment.
    Corpbank's troubles may prove more manageable. Bulgarian authorities initially estimated the cost of a possible state rescue at around 1.5-2.0 billion levs ($1.0-1.4 billion). But this could change depending on what the audit finds.
    Bulgaria, in theory, has the capacity to fund a rescue as its government debt to GDP ratio, which was 22.8 percent at the end of July, is one of the lowest in Europe.
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