About a month ago a banking crisis broke out in Bulgaria. A bank that had become popular with its political-media business – the Corporate Commercial Bank was temporarily closed and passed under the control of the Bulgarian Central Bank, which ordered full audit. The Corporate Commercial Bank is the fourth largest bank in Bulgaria and is officially owned by Bulgarian companies with a majority owner being a Bulgarian person. The bank would not have been in the spotlight of attention if there were no rumors about its voracious financial appetite and broad economic interests, as well political influence. The Financial Times recently wrote that the unexpected collapse has underscored unhealthily close ties between Bulgaria’s business community and its politicians.

After the bank was closed and its clients panicked the third largest Bulgarian bank, owned by a Bulgarian, came under pressure – First Investment Bank. Once again the Bulgarian National Bank and the Financial Ministry saved the day, promising unlimited financial support with the approval of Brussels. It seemed that the banking crisis was curbed thanks to the decisive and adequate measures taken by financial institutions in the country.

The scandal that erupted on Friday and shook society and the financial institutions was the news that came after the audit of independent auditors in the Coprorate Commerical Bank.

Central Bank governor Ivan Iskrov announced shocking results. It was revealed that some 70 percent of loans totaling 2.7 billion euro was undocumented lending or loans given to people related to the owner of the bank or to his own companies, as no guarantees existed the loans will be paid back. At the backdrop of this, the news that the bank’s biggest shareholder took more than 100 million euro in cash from the bank’s vaults before the run, sounded harmless. The case was dubbed “Robbery of the Century” by the Bulgarian press although later these charges were dropped.

Bulgarian authorities this time showed decisiveness and will to protect the interest of citizens. All healthy assets of the bankrupt Corporate Commercial Bank will be moved to Crédit Agricole Bulgaria, which Corporate Commercial Bank acquired from French Crédit Agricole just a week before the run. Crédit Agricole Bulgaria will be changing its name and will be nationalized and reopened. The interests of its clients will be protected with the support of the state. This is the overall plan of the Bulgarian National Bank for solving the current banking crisis in Bulgaria.

Speaking of problems, it is worth noting that analysts have pointed out two very important aspects of the current financial upheaval in Bulgaria. Almost unanimously they blame the central bank for a number of problems. They say the central bank had not exercised strict and timely monitoring of commercial banks. These accusations against the central bank were confirmed by the fact that the Senior Bank Supervisor at Bulgarian National Bank came under investigation just days after the start of the crisis. The central bank itself admitted there were flaws in its supervisory activities, but blamed the law and called on parliament for urgent changes. The second key element that forms part of the solution to the problems in the financial system of the country is linked to the promised state aid for exiting the dramatic situation. Some say authorities need to find over 1 billion euro to be used in case it was needed. This money can only come through debt, but then the country will have to part with his pride – the current restrictive fiscal policy, complying with all European requirements for deficit limit. This may even bring sanctions from Brussels.

The culprit in this scandalous affair, Tsvetan Vasilev, owner of Corporate Commercial Bank, is already wanted by the Bulgarian authorities but for a month he has been enjoying the hospitality of Vienna and from there says he is innocent and will make everything to protect the interest of clients who trusted him. Meanwhile, four senior officials of the bank were arrested, of whom two were later released.

The turmoil in the banking and financial system of the country reached such dimensions that President Rosen Plevneliev called for emergency consultations with the parliamentary political forces, the executive authorities and the management of the Bulgarian National Bank.  It is now clear that not everyone approved the rehabilitation and stabilization measures of the central bank. According to the rescue plan, everything should be fine by the next Monday, when the new state commercial bank will open doors at the site of collapsed and financially devastated Corporate Commercial Bank.

English: Alexander Markov