Bulgarian authorities said yesterday they had detained three more people on suspicion of plotting to destabilise the country’s banking system by spreading false information about the health of its commercial banks.
The arrests, which follow the detention of two men on Saturday on the same grounds, are part of a criminal investigation launched after depositors on Friday rushed to withdraw savings from a second bank in the space of a week.
The run on First Investment Bank, Bulgaria’s third largest lender – which bankers and economists say is well-capitalised – prompted the central bank to warn of a deliberate and systematic attack on the banking sector.
Last weekend, the central bank took over Bulgaria’s fourth largest lender, Corporate Commercial Bank (Corpbank), after customers, who were rattled by online and media reports of suspect deals involving the bank, rushed to withdraw their savings. The bank has denied any wrongdoing.
The run on Corpbank has shone a light on weak economic governance in Bulgaria which joined the European Union in 2007 but remains its poorest member state and one of its most corrupt.
Meanwhile, also yesterday, Bulgaria’s state institutions and political parties stated that they fully support efforts to stabilise the banking system and Bulgarians have no reason to fear for their savings according to President Rosen Plevneliev.
“The money of citizens and companies invested in the banking institutions of Bulgaria are safe and guaranteed. The banks will continue to operate in a normal regime,” Plevneliev told a news conference after more than four hours of talks with political party leaders, the Finance Minister and central bank chiefs.
Plevneliev said he would dissolve Parliament and appoint an interim government on August 6 to lead Bulgaria until a snap parliamentary election that political party leaders previously agreed would take place on October 5.
The money invested in the banking institutions of Bulgaria are safe and guaranteed
On Friday, leaders of the main political parties set October 5 as the date for a snap parliamentary election, putting an end to weeks of political uncertainty that has coincided with the bank runs.
Prime Minister Plamen Oresharski’s Socialist-led minority government is expected to resign shortly. In power for barely a year, it has been plagued by mass street protests and allegations of graft and has been unable to enact reforms urgently needed to revive a sluggish economy. Plevneliev, Oresharski and the central bank have all urged Bulgarian citizens to stay calm and to have faith in the integrity of the country’s banking system.
Despite its political and economic problems, Bulgarian and international economists say the Balkan country of 7.5 million people is not in danger of an economic meltdown.
Bulgaria has one of the lowest levels of debt in the EU, its central bank is widely viewed as effective and well-run and the lev currency is tied to the euro via a currency board, which means it is shielded from turmoil in financial markets.
One of the men detained on Saturday over the bank runs, a resident of Ruse, had called for the scrapping of the currency board, the national security agency said.
However, there is a broad national consensus in Bulgaria on the role of the board as a bulwark of stability. It was introduced in the mid-1990s after a financial crisis triggered hyper-inflation and wiped out many of the country’s banks.