Bulgarian National Bank (BNB) said on June 20 that it put the country’s fourth-largest lender, the Corporate Commercial Bank (CCB) under special supervision – meaning a temporary suspension of shareholders’ rights and a complete freeze on all banking operations. CCB shares were suspended from trading on the Bulgarian Stock Exchange.
The lender asked to be put under special supervision in a letter sent to the BNB, notifying the central bank that it had stopped all payments and other bank operations because of insufficient liquidity, BNB said in a statement.
Reports in Bulgarian media said that several dozen people queued outside the bank’s headquarters in Sofia to withdraw their deposits early on June 20, while other branches of the bank in Sofia did not open for work at all.
BNB appointed two special administrators to run the bank. The special supervision period, according to law, can last up to three months, during which the central bank will undertake the necessary steps to clean up the lender’s balance sheet.
CCB’s enforced shutdown will have brought back chilling reminders of the 1997 banking collapse, when millions of Bulgarians lost their savings in the hyperinflation that followed a string of bankruptcies in the banking sector – which is why BNB governor Ivan Iskrov went to great lengths to emphasise that CCB did not default.
At a news conference on June 20, Iskrov said that depositors had no reasons to worry about losing their money and there would be no reason to use the state fund for deposit guarantees.
Iskrov said that there was no threat that CCB’s request for special supervision by the central bank could trigger a chain reaction in other lenders because Bulgaria’s banking system did not have the same web of mutual dependencies as more established markets in Western Europe.
He also dismissed as groundless any fears that the CCB situation posed a risk to the currency board agreement – put in place after the banking crisis of 1997, the currency board pegs the Bulgarian lev to the euro – because the two issues were completely unrelated.
Iskrov said that BNB’s administrators would hire an outside auditor to assess CCB’s credit portfolio and other assets, after which negotiations would begin with current shareholders and potential buyers.
“Our idea is to clean up the bank and then, when it is a leaner entity, to hold talks with potential buyers,” he was quoted as saying.
Iskrov said that CCB became the subject of a bank run this week, with large amount of withdrawals leaving the lender with insufficient liquidity. He blamed the anonymous letter sent to the media on June 18, in which the author claimed that BNB deputy governor in charge of bank supervision Tsvetan Gounev was the target of a pre-trial investigation.
The letter alleged that Gounev was under investigation for failing to exercise proper oversight of a “bank that has become the centre of attention in recent days”, but did not name the bank. Bulgarian media interpreted the letter to be referring to CCB after last week prosecutors searched and seized documents “at offices of companies in Sofia” in buildings that are home to CCB as well as TV7 and News7 channels. In separate statements, the bank and the media outlet denied being the subject of investigations.
CCB’s majority shareholder is Tsvetan Vassilev, who is the target of allegations claiming that he ordered the murder of Delyan Peevski, the controversial figure to whom Vassilev long has been seen as close in business relations – but recent media reports, confirmed by Vassilev himself, suggested that the two had fallen out.
Luxembourg-based Bulgarian Acquisition Company II, owned by an Omani government fund, holds 30 per cent in CCB and Russia’s Vneshtorgbank Group has another 9.9 per cent.
CCB had assets of 6.7 billion leva (about 3.42 billion euro) at the end of September 2013. In January, the bank announced the acquisition of Credit Agricole’s unit in Bulgaria, which had assets of 480 million leva. BNB’s regulatory approval of the deal, granted last month, said that CCB agreed to pay 92 million leva for the smaller lender.
(Bulgarian National Bank. Photo: Clive Leviev-Sawyer)