Bank run fears in Bulgaria

Dozens of depositors have withdrawn savings from Bulgaria’s third biggest bank despite assurances from the government and the European Union that their money was safe after a similar run shut down another major lender last week.

Bulgarian authorities have arrested four people suspected of trying to destabilise the banking system in a concerted phone and internet campaign. However, the queues forming to withdraw cash have thrown a spotlight on weak economic governance in the EU’s poorest state.

A credit line of 3.3bn levs (£1.3bn), requested by Bulgaria, was approved on Monday by the European commission. The EU executive, echoing the International Monetary Fund and economists, said the Bulgarian banking system was “well capitalised and has high levels of liquidity compared to its peers in other member states” of the 28-nation bloc.

President Rosen Plevneliev urged Bulgarians to keep faith with the banks in a national appeal on Sunday after emergency talks with political party leaders and central bank officials. “There is no cause or reason to give way to panic. There is no banking crisis, there is a crisis of trust and there is a criminal attack,” he said.

FIB Bulgaria bank

Queues formed nevertheless outside branches of First Investment Bank, although they were smaller than on Friday. The lender says it has sufficient capital to meet clients’ demand.

“I am here because I remember what happened nearly 20 years ago,” said one woman aged about 60 who gave her name only as Gergana. She was referring to a financial crisis in 1996-7 which sparked hyperinflation and the collapse of 14 banks.

About two-thirds of Bulgaria’s banks are now foreign-owned, in sharp contrast to the mid-1990s.

The crisis has rattled Bulgaria’s fractious political class, forcing them to bury differences at a time of great political uncertainty and last week they agreed to hold an election on 5 October.

An interim government will be appointed on 6 August to steer Bulgaria until the election.

Bulgaria has one of the lowest debt levels in the EU and the lev is tied to the euro via a currency board.