Bulgaria agrees to rescue Corpbank by bailing-in shareholders, injecting state capital

By bne IntelliNews June 23, 2014

Bulgaria's central bank (BNB) announced on Sunday (June 22) that it plans to recapitalise the troubled Corporate Commercial Bank, which it put under special supervision two days earlier, through a bail-in of shareholders and by injecting state capital into the lender. The central bank stressed that Corpbank's liquidity problems are an isolated case and the banking system remains stable.

BNB will write off the stakes of Corpbank's current shareholders and it would also order the state-owned Bulgarian Development Bank and the country's Deposit Insurance Fund to inject capital into the banking group. BNB said that it has also put under special supervision for three months Corpbank's recently acquired subsidiary - Credit Agricole Bulgaria.

The amount of the capital needed to prop up the banking group will likely become known only after independent auditors carry out a full audit of its books. Corpbank's assets stood at BGN 7.3bn (EUR 3.73bn) at end-March. Its first quarter net non-consolidated profit grew 18.2% y/y to BGN 13.1mn.

Corpbank, Bulgaria's fourth-largest lender, asked BNB for help on Friday (June 20), realising that depositors are withdrawing vast amounts of cash from the bank, triggering a liquidity . BNB intervened promptly by freezing all of the bank's operations and taking control of its management.

The bank's customers reacted to the indictment of Tsvetan Gunev, the deputy governor of the central bank in charge of supervising lenders and their loan books. Gunev is under investigation for failing to perform his banking supervision duties. Gunev allegedly failed to act when Corpbank exceeded the limit for bad loans after it loaned money to firms associated with its controversial majority owner, Tsvetan Vasilev.

Central bank governor Ivan Iskrov told a news conference on Friday afternoon that the bank's depositors should not worry about their money, underlining the lender is not bankrupt. Bulgaria's Deposit Insurance Fund (BDIF) guarantees deposits in local and foreign currency of up to BGN 196,000 (EUR 100,000).

BNB also said on Friday that one of Corpbank's minority shareholders - Russia's VTB Bank (which owns 9.9%), has expressed interest to negotiate with the central bank authorities in order to help Corpbank.

The troubled lender is controlled by local non-bank financial company Bromak (owned by local businessman Tsvetan Vasilev), which has a 50.6% stake. The second largest shareholder in the bank is the Bulgarian Acquisition Company II (a sovereign fund controlled by the Sultan of Oman) with 30.3%.

The lender's problems come at a time of heightened political instability in the country. The government of PM Plamen Oresharski, backed by socialist BSP and ethnic Turk MRF, is expected to resign soon as the main political parties have already agreed on early parliamentary elections in the autumn. The ruling coalition embraced the idea of snap polls after the senior ruling partner BSP suffered a defeat by wide margin in the May European Parliament elections.

Related Articles

Czech KMV acquires PepsiCo bottler in Bulgaria

The Czech Republic’s biggest producer of mineral and spring water Karlovarske mineralni vody a.s. (KMV) is buying Quadrant Beverages, the official bottler of PepsiCo in Bulgaria, the Czech company ... more

Bulgarian cabinet terminates concession procedure for Sofia Airport

Bulgaria’s caretaker cabinet has cancelled the concession procedure for Sofia Airport, as the process to award a concession for nearby Belgrade airport surges ahead.  According to the ... more

EU asks CEE to comment on Russian gas promises

The European Commission has invited comments from Central & Eastern European states on proposals put forward by Russian gas giant Gazprom to meet competition concerns. Visegrad and the Baltic ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss