Corporate Bank is an ordinary commercial bank in Bulgaria officially owned by Bulgarian companies and with a majority owner who is a Bulgarian physical person. The bank would have hardly stirred any interest on the part of the public, had it not been for various speculations in the recent years regarding its big appetites, wide-ranging business interests and huge economic and more recently even political influence.

The most interesting of these speculations asserts that a great number of state-run companies and public institutions in Bulgaria keep their money in this bank and thus finance the large-scale operations of its ambitious owner often labeled as one of the country’s most powerful oligarchs.

During and after the recent European Parliament elections backstage political games implicating Corporate Bank became the talk of the day. In principle, there is hardly a bank in the world that is glad to see negative information circulated about it, be it truthful or not. This is with good reason, because, as the Bulgarian National Bank Governor Ivan Iskrov put it, “a bank is most easily killed by means of a newspaper”.

Unfortunately he has proved right: following media noise and an emerging marred public image, the bank has fallen into aliquidity crisis and is no longer in a position to service its obligations and customers.

The BNB which only few days before this public avowal was giving assurances that everything in the country’s banking system was in order and that it was watching closely every single financial-crediting institution, was suddenly startled and decided to intervene in a most decisive manner. It closed the bank down and replaced its management with conservators.

The central bank however has gone beyond these standard measures. Fully aware of the possible dangerous impacts on the entire banking system, on the economy and society, the BNB has asked the state for support in the enforcement of a radical recovery plan. It consists of raising the capital of the troubled commercial bank by means of public finances.

In practice, this means that the state will become a shareholder in the financial institution. Besides, the state will cater for the impaired liquidity of Corporate Bank so that it could service its customers in a normal way. We should add something very important to these decisive and adequate measures for the prevention of a chain reaction endangering the banking sector in the country.

The entire package of rescue measures will be implemented at once and in a month from now, Corporate Bank and its bank group should reopen their doors. Until then however, the official managers appointed by the central bank to manage the financial institution should work very hard and clear the terrain because it is obvious that once Bulgaria’s fourth largest commercial bank is put under BNB supervision, one should blame not only media speculations but also a few projects which have turned out too risky and unprofitable.

The most important lesson to learn from this story is that the 20 years of stability and constant expansion of commercial banks in Bulgaria have blunted the attention of BNB supervisors who have failed to respond in time and prevent the collapse of a big commercial bank. Another important conclusion however has to do with the fact that the board of the Bulgarian National Bank has decisively and quickly moved to radical and absolutely adequate measures for dealing with the crisis. For this courage the officials from the central bank deserve respect and applause.

English: Daniela Konstantinova