bne -

Bulgaria's central bank (BNB) has revoked the operating licence of Corporate Commercial Bank (Corpbank), once the country's fourth-largest lender, after private investors and the government refused to take steps to plug the BGN3.75bn (€1.9bn) hole in the bank's capital.

BNB said in a statement that it has asked the courts to declare Corpbank insolvent. Once that has happened, the Bulgarian Deposit Insurance Fund (BDIF) will take over the bank and appoint a new management. 

The central bank said it would recommend that the new management of the bank investigate its predecessor's stewardship of Corpbank. Bulgaria's prosecutor's office will also investigate allegations of misappropriation by the previous management of the bank.

BNB placed Corpbank under receivership after the lender suffered a liquidity crisis in June caused by massive deposit withdrawals. The BNB then ordered a comprehensive audit of its balance sheet, totalling some BGN7.6bn in assets, to see whether the lender met regulatory capital requirements. 

The audit recommended that Corpbank needs to make provisions of BGN4.2mn, which compares with the bank's equity of only BGN198mn. The hole in the balance sheet led Corpbank's capital adequacy ratio to fall to a negative 180.2%, the central bank said. 

BNB is now required by the law to withdraw the licence of the lender because of its capital shortfall and the lack of recapitalisation efforts.  Shareholders refused to inject additional capital, and no other market player offered to provide their own funds to recapitalise the bank.

Insured depositors (i.e. those holding accounts of up to €100,000) will regain access to their funds on December 4, the BDIF said in a statement. In order to respect all legitimate depositor claims, the BDIF will have to boost its liquidity through a loan. It currently has only BGN2.1bn at its disposal, while the amount of insured Corpbank deposits is said to be at least BGN3.7bn. 

The BNB said it plans to propose that the new temporary management of the bank hires a firm with international experience to investigate the lender's asset management before it was placed under receivership.