Bulgaria has ‘stable system’ says EU

DOZENS of depositors withdrew savings from Bulgaria’s third-biggest bank yesterday despite assurances from the government and the European Union that their money was safe after a similar run shut down another major lender last week.

People queue up in front of an office of Bulgarias First Investment Bank. Picture: Getty

Bulgarian authorities have arrested four people suspected of trying to destabilise the banking system in a concerted phone and internet campaign during a crisis that has thrown a spotlight on weak economic governance in the EU’s poorest state.

A credit line of 3.3 billion levs (£1.35bn), requested by Bulgaria and approved yesterday by the European Commission, helped shares in lender First Investment Bank rise 20 per cent, reversing most of Friday’s losses.

The EU executive, echoing the International Monetary Fund and economists, said the Bulgarian banking system was “well capitalised and has high levels of liquidity compared to its peers in other member states” of the 28-nation bloc.

President Rosen Plevneliev urged Bulgarians to keep faith with the banks in a national appeal on Sunday after emergency talks with political party leaders and central bank officials.

“There is no cause or reason to give way to panic. There is no banking crisis, there is a crisis of trust and there is a criminal attack,” he said.

Queues formed nevertheless outside branches of First Investment Bank yesterday, although they were smaller than on Friday.

At one branch there were about 30 people waiting to take out money, roughly half the numbers seen at midday on Friday. The lender says it has sufficient capital to meet clients’ demand.

“I am here because I remember what happened nearly 20 years ago,” said Gergana, 60. She was referring to a financial crisis in 1996-7 which sparked hyperinflation and the collapse of 14 banks. “I trust the president but I think he was misled by the bankers,” she said.

Last week the central bank took control of Bulgaria’s fourth-biggest lender, Corpbank, whose clients include many state companies, after depositors, rattled by reports of suspect deals involving the bank, rushed to withdraw their savings.

The central bank and economists said Corpbank was a special case and contagion to other banks would be limited. Corpbank has denied any wrongdoing.

The recent crisis has rattled Bulgaria’s fractious political class, forcing them to bury differences at a time of great political uncertainty, and on Friday they agreed 5 October as the date for a snap election, promised after May’s European elections.

Prime minister Plamen Oresharski’s minority cabinet, dogged by charges of graft and street protests since it took power barely a year ago, said it would soon resign after the main coalition partner, the Socialists, did badly in the EU vote.

Plevneliev said on Sunday he would dissolve parliament and appoint an interim government on 6 August to steer Bulgaria until the election.

Despite its political and economic woes, the IMF and economists have praised the stability of Bulgaria’s banking system and its solid state finances. It has one of the lowest debt levels in the EU and the lev currency is tied to the euro via a currency board, approved of by a broad consensus as a bulwark of stability.