Fourth Largest Bulgarian Bank Seized After Bank Run: "Let's Not Tear Down Our House" Central Banker Begs

Tyler Durden's picture

The small, impoverished country of Bulgaria may not be in the Eurozone (even though its currency is pegged to the Euro), but it is in the European Union. Which is why we find it surprising that there has been relatively little mention that overnight the fourth largest Bulgarian bank, Corporate Commercial Bank (Corpbank) and which in recent weeks has made headlines due to the political exposure of one of its largest shareholders, was seized by the Bulgarian central bank following what Reuters reports was a run on the bank.

With preserving confidence in the banking system key, and since the small country is not immune from failure unlike its southern neighbor which knows Europe will now never let its banks fail, the central bank promptly took to boosting morale, when its governor Ivan Iskrov begged depositors to stay calm, saying: "Let's not tear down our house."

Reuters also reports that the Bulgarian National Bank said it had taken control of Corpbank's operations for a period of three months and removed its  management and supervisory board, but stressed it was not bankrupt.  A Reuters photographer saw dozens of people queuing outside the main office of the bank in the Bulgarian capital on Friday.

The central bank said the run on the lender was triggered by adverse media reports, and that it acted after receiving information from Corpbank on Friday morning that it had stopped all payments and bank operations due to a liquidity drain.


"As you know, there has been a lot of talk about the bank and one of its shareholders, which triggered bank runs," central bank governor Ivan Iskrov said at a news conference. "It is very important to be very careful when we talk about banks. Let's not tear down our house alone unnecessarily."


"Let me make this very clear. Corporate Commercial Bank is not a bankrupt bank. We are acting swiftly to avoid a bankruptcy," said Iskrov.

Iskrov said the banking system was not so interlinked that Corpbank's situation would affect other commercial banks in the country.

Alas, appeals to keep calm failed when as AP adds, long queues could be seen Friday at the bank's offices as people become worried over media reports about the bank's poor finances. Turns out the media reports were right, although in a world of self-fulfilling prophecies one never knows what came first: the rumor (pardon fact) of insolvency, or the reports surrounding it.

While relatively small by European standards, there are 29 commercial banks operating in Bulgaria and about three quarters of the banking system's assets are foreign-owned. Among foreign banks with operations in Bulgaria are Unicredit, Raiffeisen Bank, Hungary's OTP , National Bank of Greece, EFG and Alpha Bank. Curiously, Russia's largest bank, VTB Bank, is a minority owner of Corpbank - it said it was ready to support the bank.

Bulgarian website Novinite provided further details about what may be the first domino in Bulgaria's banking sector:

Bulgarian National Bank (BNB)'s Governing Council held a press conference just an hour after the central bank announced it had placed KTB under special supervision upon the commercial bank's request. It decided to do so after KTB sent a letter asking for the step, due to “exhaustion of liquidity and termination of all payments and banking operations”.

With its move, as of June 20, 2014 BNB revokes the rights of KTB shareholders and appoints a supervisory board.


In the Governing Gouncil's statement to the media delivered at the press conference, Iskrov reminded that KTB was “among the banks with the highest liquidity" before a "rumor" involving a BNB Deputy Governor and his alleged dependency on "a certain bank" (implying the role of KTB) was spread by an anonymous e-mail sent from a purported central bank employee to the media.


The rumor coincided with the start of pre-trial proceedings against BNB Deputy Governor Tsvetan Gounev.


It also led to the withdrawal of "huge amounts of ready money" and prevented the bank from delivering on its liabilities, the BNB Governor explained

In the statement Iskrov presented the Governing Council's decision, under which BNB places KTB under supervision for a period of three months.


The bank is to freeze any operations within that stretch of time and is forbidden to perform any activity. As a result clients of the bank would have it difficult to be provided any services. A Supervisory Board of two members, Hristina Stanova and Slavyana Danailova, has been appointed.


BNB also temporarily dismisses KTB's four Governing Council members and four Supervisory Board members and transfers their competencies to its own two-strong board.


Voting rights of shareholders controlling more than 10% of KTB assets - namely Bromak Invest (owned by Tsvetan Vasilev) and Bulgarian Acquisition Company Luxembourg - are also being suspended for three months.


The BNB Supervisory Board is now virtually KTB's governing body, with "huge competencies" and in charge of safeguarding the bank's exclusion from the Bulgarian payment system.


The Board is also to conduct an assessment of the bank so that talks could be held with shareholders "and other potential buyers".


"Conversations with the shareholder having expressed interest are starting immediately. They can end in a day, a week or a month, when the interest has been confirmed by shareholders and they provide the respective support," Iskrov explained.

Perhaps the bigger problem for Bulgaria is that its central bank itself is now the target of an official probe after its deputy governor for bank supervision, Tsvetan Gounev, took a leave as a result of a pre-trial investigation aimed at him. Furthermore, From Sofia Globe:

Bulgarian National Bank (BNB) said on June 18 that its deputy governor for bank supervision, Tsvetan Gounev, has taken leave from the central bank as a result of pre-trial investigation against him.


In a statement posted on its website, BNB said that Gounev put in his leave request in order to “not allow any doubts about obstacles to the investigation”. The central bank said that “from the moment that the BNB was notified of Mr Gounev’s repealed permit for classified information, his access to such documents has been suspended.”


Repealing the permit for access to classified information is often the first indication that a senior official is under investigation.


The prosecutor’s office initially made no comment, but later in the day, Prosecutor-General Sotir Tsatsarov said that the investigation had been under way for two weeks and was a result of allegations made by the anti-government Protest Network.


(The prosecutor’s office statement did not specify which allegations this referred, but it is presumed to be in connection to the dossier based on media reports containing various allegations, submitted to prosecutors in February, which called for an investigation into media mogul Delyan Peevski, Corporate Commercial Bank majority shareholder Tsvetan Vassilev and Nikolai Barekov, the former talk show host-turned-politician that fronts the Bulgaria Without Censorship party.)


Earlier in the day, however, Bulgarian media reported receiving an anonymous letter, whose author claims to be an employee of BNB, alleging that Gounev was under investigation by prosecutors on charges of mismanagement in office.


The letter claims that Gounev failed to exercise proper oversight of a “bank that has become the centre of attention in recent days”, but did not name the bank. The author claims that both Gounev and BNB governor Ivan Iskrov “put pressure” on the bank supervision department not to apply proper oversight on the affairs of this bank and “have been financially dependent on this bank for years.”

So is this just a political witch hunt in a country notorious for backroom dealings, or the start of something greater? The answer will depend on whether the local population does indeed, as the central bank requests, stay calm or if people decide en masse once again that the best option is simply to put what little savings they have in the ir local mattress, while they still can (or before the Fed suggest fee gates be implemented, the same way it would like to force a ran out of US bank funds).

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nope-1004's picture



Those pple are lined up to put money into the bank, knowing how they must help Dr. Bernanke and Mr. Yellen fight the financial crisis.

Signed, MDB


NotApplicable's picture

I can't seem to find Bulgaria on my scorecard. Are they on the TBTF side, or the austerity side?

Beam Me Up Scotty's picture

Off topic, but does anyone have a DOW 17,000 hat they can sell me?

Dr. Engali's picture

No but I do have a Spider-man towel.

NoDebt's picture

The Spider Man towel joke just never gets old.  ZH classic.

SafelyGraze's picture

"Those people are lined up to put money into the bank"


wish I had posted that

N2OJoe's picture

  [bangk-ruhpt, -ruhpt]


Law. a person who upon his or her own petition or that of his or her creditors is adjudged insolvent by a court and whose property is administered for and divided among his or her creditors under a bankruptcy law.

any insolvent debtor; a person unable to satisfy any just claims made upon him or her.

#2 sounds like exactly the situation they are in now...
COSMOS's picture

I wonder if this stampede might of been set  off with some Russian help as payback for stopping the work on Southstream.  It doesnt take much to create a stampede. A few well placed stories or rumors running around.

tonyw's picture

He who panics first panics best - get your money out quick before it's all gone.


Bunga Bunga's picture

"Money in the bank" is a complete myth.

They did not put into the bank. They went to the building, to give it the bankers, who used it the next minutes to pay their liabilities. Not the money you expect in the bank, only books ... what a surprise. Only idiots believe something different.

MFL8240's picture

Write Yellen she may have one or Dimon/Blanfien, this corruption is simply disgraceful!.

Bemused Observer's picture

I've got a pair of Dow 17,000 commemorative sneakers you can have...they've got no soles, so you'll basically be walking barefoot, but the tops will look REAL good to your friends.

SofaPapa's picture

I liked the "our house" part of his quote.  As though the bankers and the people have anything in common.  Finally enough people are figuring out that "his" house is not "their" house.

Save_America1st's picture

Maybe those people should start by tearing down that fucking bankster's house first. 

Bemused Observer's picture

It's "our house" when there's lot's of equity in it. It's "your house" when the mortgage payment is due and you're underwater.

COSMOS's picture

Our house in the middle of our private street, Our house where you were never meant to sleep...

CPL's picture

Bulgaria is now back to being broke but now they don't owe any money to anyone because they no longer have a central issuance.  That's the situation there.  Enjoy your freedom Bulgaria.  You are the first to figure it out.

//protip:  Break the central banks and all the money owed goes away, because it's their problem then.  The central banks become the 'bad banks'.  In day to day practice, everyone will be broke, since that's the status quo everywhere now, nothing changes except one thing.  Everyone will be broke but not owe anything.

_ConanTheLibertarian_'s picture

It just occured to me that with negative interest rates, your money in the bank will eventually become next to zero if you don't add any new money.

So long for saving for later.

Dr. Engali's picture

Uhhmmm.... That's not money you have in the bank. That's debt based fiat currency that the banking system can debase at will. 

_ConanTheLibertarian_'s picture

So it's double evil basicly. Sorry I abused the word money. I put half of my fiat in real money immediately in 2009.

Rock Sniffer's picture

It's even worse than that.  It's just an entry on the liability side of their balance sheet.  A promise to pay money (currency; that is also a promise to pay which you can't redeem) that they don't have.

NotApplicable's picture

Yep, the financial world has devolved into one gigantic circle-jerk of everybody owing everybody... something.

Madcow's picture

remember - when you put money in a "bank" you become an unsecured creditor - and the money is no longer really yours. 

that allows the bank owners to just take your money when they need it - and there's nothing you can do about it.  All the goverments and regulators will be able to do is issue some kind of "sorry - but you got tricked fair and square - and now its time to move on" statment. 

fore-wared is fore-armed. 


COSMOS's picture

Maybe these people will wake up and use that money to buy precious metals instead, or maybe some extra land where they can grow some food and actually have some real 'interest' that keeps them going and alive.

Kirk2NCC1701's picture

Then simply withdraw the bulk of your Deposits, and convert them into foreign currency bills.  E.g. CAD, CNY, CHF, RBL bills.  To really rub dirt into the wound.

Then deposit at the "3S Bank" (Bank of Sealy, Serta & Simmons).  It's what a true libertarian and prepper would do: All contrarian, "AllHedge", all the time.

youngman's picture

They should have bought US Treasuries....

Dr. Engali's picture

Belgium bought them all and didn't leave any for them.

highly debtful's picture

So we win. Bow to your new master, slave, BOW!

But if the Russians, the Chinese and the Arabs take down the petrodollar, does that mean my beautiful Belgian fatherland is scr***d? 

Dubaibanker's picture

Don't worry...these are the kind of opportunities that Putin won't miss to seize.

According to Bloomberg, VTB bank of Russia owns 9.9% of this Bulgarian bank and VTB is owned 60.9% by the Russian Govt and is the second largest bank in Russia and just last month concluded a major Yuan-Ruble deal with China.

If all goes well, Russia may support and bail this bank out.

Don't lose heart....Magnanimous Putin is here to save the day/week/month/year...!

This may be the Russian masterstroke waiting to happen. He saved Syria, Iran, Turkish banks etc etc...already and doesn't even have a Nobel Prize yet! 

LawsofPhysics's picture

This criminal should be less concerned about losing his house and more concerned about losing his fucking head.  Nothing changes otherwise.

Kirk2NCC1701's picture

<--- Losing his head "A la Francaise" (with guillotine), or...

<--- Losing his head "Al ISIS" (with dull knife)?

Kirk2NCC1701's picture

<--- Losing his head "Gringo/Gangman style":  Blow it off with a 12 gauge.

<--- Losing his head "Western/Hangman style": Hang 'em high, let the buzzards pick 'em clean

fishmonger's picture

"Buzzards gotta eat, same as worms." - Josey Wales

Cthonic's picture

  "The Bulgarian National Bank said it had taken control of Corpbank's operations for a period of three months and removed its management and supervisory board, but stressed it was not bankrupt."

Yet.  Self fulfilling prophecy.

Dr. Richard Head's picture

When officials deny anything in public it should viewed as a contrarian indicator. 

I lost trust in the banking system many moons ago and sleep better at night...then again it could just be alcohol poisoning.

NoDebt's picture

4th largest Bulgarian bank.  That's sort of like the second-best Jamaican bobsled team.

Total deposits: 16,000 Euros.  After the "bank run" it was even less.

Dewey Cheatum Howe's picture

It is all about scale in relation to the smaller subsystem. It will fail in the same general manner on a larger scale just need an equivalent scaled up version in relation to for the same cause and effect...

1/2 is equivalent to 50/100 just smaller in scale.


boattrash's picture

The House is on FIRE. Let the MothaFu**a Burn!

JRobby's picture

Bank Run!!!!

Coming to your town soon!

vote_libertarian_party's picture

Must be snowing in Bulgaria...

NuckingFuts's picture

Sofia is pretty nice place.  I spent a few weeks there in the md 90's and really had a good time.  Im sure things have changed but it was cheap and fun.  Rock bands covering Pink Floyd with thick Bulgarian accents.  Nice folks, sucks for them .... soon to suck for us too.

Kirk2NCC1701's picture

Tyler is quite partial to Sofia.

eXMachina's picture

Is Tyler Bulgarian? Ko stava be Tyler, kazi sdrasti na edin bulgarian ot Aussie!!

buzzsaw99's picture

"our house"??? die you bank cocksucker!

hugovanderbubble's picture

Remember Hungary....Forint?......Non sense currency....

hugovanderbubble's picture

Croatia is the next country to default in the EuroLand

Kirk2NCC1701's picture

No surprise there.  Even with their own currency, they kept printing more of it.

None of this crap will end until ploticians* are put back on a short leash, by pegging currency to a mix of hard assets  that you can't create out of thin air (PM, Energy).  And by nationalizing the CBs.

* yes, PLoticians, not POliticians

earnulf's picture

"The bank is to freeze any operations within that stretch of time and is forbidden to perform any activity. As a result clients of the bank would have it difficult to be provided any services."

So for THREE MONTHS, your fund belong to the bank.     How many people are going to survive for three months with no access to their funds?    And what do you bet that folks who have a loan better not miss any payments during those three months!

Dewey Cheatum Howe's picture

Darkcoin bitchez. Bitcoin is slowly losing it's luster unless it keeps up with the arms race for true financial privacy.

Also unlike the argument that SHA256 is compromised stuff that uses X11 hashing algorithms requires 11 seperate encryption schemes to be broken to compromise the whole system unlike 1 with Bitcoin or Litecoin (Scrypt).


Ban KKiller's picture

Banks are corrupt, world wide,  as far as I can tell. We see in the news every single day that there is another crime comitted by some bank official or bank policy. We can see evidence on the DOJ website ( no, really they do report on banksters and how they wrist slap them until they are pink ),, or on SEC.GOV. 

What fool trusts banks? Oh, THOSE fools.       Where the bank will tell Eric Holder what to do.