Bulgaria speaks to shareholder Oman about Corpbank rescue (updated)

First Investment Bank AD

18/07/2014 14:08

(Adds quote, details, background throughout) 
    By Tsvetelia Tsolova 
    SOFIA, July 18 (Reuters) - Bulgaria's finance minister spoke 
to the head of Oman's sovereign wealth fund on Friday about help 
for Corporate Commercial Bank and said the government now hoped 
to engineer a private rescue rather than a state bailout of the 
failing bank. 
    Corpbank  6C9.BB , was forced into the control of Bulgaria's 
central bank in June after depositors unnerved by reports of 
shady deals by the bank's main owner withdrew more than a fifth 
of its total deposits. A subsequent audit showed activities at 
the bank "incompatible with the law and good banking practices" 
according to the central bank. 
    A shareholder rescue was Prime Minister Plamen Oresharski's 
first proposal for the bank, but he said it looked unlikely 
after Russia's VTB bank  VTBR.MM , which owns just under a tenth 
of Corpbank, declined to provide more money. 
    Bulgaria then estimated the public rescue cost at about 
1.5-2 billion levs ($1.38 billion) but its planned bailout - 
under which Corpbank would collapse, its assets move into a 
subsidiary and depositors' money be guaranteed by the state - 
has been opposed in parliament. The bailout could involve 
Bulgaria raising new debt at the expense of its budget deficit. 
    Bulgaria's finance ministry issued a statement on Friday 
saying that Finance Minister Petar Chobanov spoke by telephone 
to the head of Oman's sovereign wealth fund - which owns a third 
of Corpbank - about the prospect of the fund helping out. 
    Bulgaria's original bailout package would likely have 
enforced losses on the Omanis, as well as VTB and Corpbank's 
main owner - wealthy Bulgarian businessman Tsvetan Vassiley, who 
has denied the allegations against him.   
    Friday's phone call revealed that the Omanis, who have never 
publicly commented on the troubles at Corpbank, are still at 
least considering putting money towards a rescue, according to 
the finance ministry statement.  
    "Finding a private solution to the problem that does not 
engage public resource is the most desired outcome of the 
situation," the statement said. "Both sides reiterated their 
readiness to make efforts to find such a solution."  
    Chobanov told Abdul Salam al Murshidi, the chief executive 
of the State General Reserve Fund of the Sultanate of Oman, that 
current shareholders would be given the chance to provide the 
necessary capital and liquidity to the bank and that the state 
would only intervene if that proved impossible. 
    Corpbank's top shareholder Vassilev has denied the 
allegations against him and claimed the bank run was a plot 
orchestrated by his rivals. 
    Bulgaria's central bank has said prosecutors will have to 
determine whether Vassilev's withdrawal of 206 million levs from 
the bank, via a third party, amounted to theft. Four bank 
officials have been arrested since the audit, which the central 
bank said proved "serious felony" had taken place. 
    The crisis spread quickly to another lender, First 
Investment Bank  5F4.BB , and forced Sofia to set up a 
protective $2.3 billion credit line for its banks and look to 
Europe to help supervise its lenders. 
    The central bank will continue to control Corpbank until 
Sept 21, but there is still no political consensus on how to 
rescue it, including to what extent its depositors and 
bondholders will be protected. 
    The situation is further complicated by the fact that 
Bulgarian Prime Minister Plamen Oresharski's technocrat 
government is due to step down next week after the ruling 
Socialist party's poor showing at the European Parliament 
elections in May. A snap election is due to be held in October. 
 
 (Writing by Matthias Williams; Editing by Sophie Walker) 
 ((tsvetelia.tsolova@thomsonreuters.com)(+359-2-93-99-731)) 
 
Keywords: BULGARIA BANKING/