Arrests over plot to destabilise Bulgarian banks

People queue in front of a branch of Bulgaria's First Investment Bank in Sofia. Picture: Getty
People queue in front of a branch of Bulgaria's First Investment Bank in Sofia. Picture: Getty
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Bulgarian authorities yesterday detained three people on suspicion of plotting to destabilise the country’s banking system by spreading false information about the health of its commercial banks.

The arrests are part of a criminal investigation launched after depositors rushed to withdraw savings on Friday, the second bank at which this occurred in the space of less than a week.

The run on First Investment Bank, Bulgaria’s third-largest lender – which bankers and economists say is well-capitalised – prompted the central bank to warn of a deliberate and systematic attack on the banking sector.

Last weekend, the central bank took over Bulgaria’s fourth largest lender, Corporate Commercial Bank (Corpbank), after customers, who were rattled by online reports of suspect deals involving the bank, rushed to withdraw their savings. The bank has denied any wrongdoing.

The run on Corpbank has highlighted weak economic governance in Bulgaria which joined the European Union in 2007 but remains its poorest member state and one of its most corrupt. On Friday, leaders of the main political parties set 5 October as the date for a parliamentary election, putting an end to weeks of political uncertainty that has coincided with the bank runs.

Prime minister Plamen Oresharski’s Socialist-led minority government is expected to resign shortly.

In power for barely a year, his government has been plagued from the start by mass street protests and allegations of corruption and has been unable to enact reforms urgently needed to revive a sluggish economy.

Party leaders yesterday began consultations with president Rosen Plevneliev on how to maintain political and economic stability until the election.

The president is expected to approve the election date. Mr Plevneliev, Mr Oresharski and the central bank have all urged Bulgarian citizens to stay calm and to have faith in the integrity of the country’s banking system.

Despite its political and economic problems, Bulgarian and international economists say the Balkan country of 7.5 million people is not in danger of an economic meltdown.

Bulgaria has one of the lowest levels of debt in the EU and its central bank is widely viewed as effective and well-run.

One of the men detained over the bank runs, a resident of the Danube city of Ruse, had called for the scrapping of the currency board, the national security agency last night said.

Petar Ganev, of the Sofia-based Institute for Market Economics, said: “The banking system is stable and there is no need of a new loan from the International Monetary Fund at the moment.

“The credit rating of the country remains high despite the current panic.”