Bulgaria’s central bank will increase the capital of Corporate Commercial Bank AD and the former local unit of Credit Agricole SA that CCB bought earlier this month after both lenders were placed in receivership.
The central bank in Sofia placed under special supervision CCB’s unit, which it acquired on June 12, the regulator said in an e-mailed statement today. The monetary authority appointed two administrators, dismissed the lender’s management and canceled the shareholders’ rights reflecting the same actions taken against its parent bank on June 20.
“Aiming to preserve the activities of the CCB bank group and its rehabilitation,” officials “will take actions to increase its capital” using funds from the state-owned Bulgarian Bank for Development and Deposit Guarantee Fund, the central bank said.
Bulgaria’s central bank seized CCB, the Balkan country’s fourth-largest lender in terms of assets, after it ran out of funds and stopped all operations two days ago, spurring the biggest slump in the nation’s stock index in 16 months. The seizure, the first in 17 years, came before Bulgaria’s government starts investor meetings in Europe on June 23 for a possible bond sale.
The government and the central bank will secure the needed liquidity support for the Corporate Commercial Bank group to fully cover its dues to its clients, the regulator said today.
The administrators of both lenders will hire external auditors to evaluate their assets and liabilities in the next 10 days, according to the statement. All actions related to the group’s recapitalization will be taken by July 20 and the banks will open for business on July 21 at 9 a.m. in Sofia, the regulator said.
“The liquidity shortage in Corporate Bank group is an isolated case and is not connected with rest of the banking system,” the central bank said today.
Corporate Bank, in which Russia’s VTB Group holds 9.9 percent, faced an “enormous run on funds” in the past week after reports that a large depositor started pulling money, central bank Governor Ivan Iskrov told reporters in Sofia on June 20.
Businessman Delyan Peevski took his company accounts out of Corporate Commercial, including those of tobacco maker Bulgartabak AD, following a rift with the lender’s majority shareholder, Tsvetan Vassilev, Capital newspaper reported on June 18, citing unidentified people. Corporate Commercial and VTB jointly acquired Bulgartabak in 2011.