Newspaper article International New York Times

Large Bank in Bulgaria on Brink of Bankruptcy ; Most of Its Loan Records Are Missing; $136 Million Is Said to Have Been Taken

Newspaper article International New York Times

Large Bank in Bulgaria on Brink of Bankruptcy ; Most of Its Loan Records Are Missing; $136 Million Is Said to Have Been Taken

Article excerpt

The failure of Corporate Commercial Bank, the country's fourth- largest lender, will be the first banking collapse in the East European country since the 1990s.

After a tumultuous month for the Bulgarian financial sector that saw thousands of fearful depositors line up to pull their savings out of two banks, the country's central bank has said it will start bankruptcy proceedings against one of the lenders.

The failure of Corporate Commercial Bank, the country's fourth- largest lender, will be the first banking collapse in the East European country since the 1990s.

The decision to fold Corporate Commercial Bank, known as K.T.B., came after an audit showed that records relating to most of the bank's loan portfolio were missing, the central bank said on Friday. The central bank, the Bulgarian National Bank, also accused the lender's biggest shareholder of taking more than $136 million in cash from the bank's vaults before the run last month.

The tumult last month at K.T.B., which quickly spread to another lender, First Investment Bank, prompted the European and Bulgarian authorities to take emergency measures, and served as a reminder that parts of Europe's financial system are still far from stable in the wake of the Continent's debt crisis. It also put the spotlight on the dubious links between business magnates and politicians in Bulgaria, the European Union's poorest country.

The central bank, which assumed control of K.T.B. on June 20, after more than 20 percent of its deposits were withdrawn in a week, said it was planning to move the bank's healthy assets to Credit Agricole Bulgaria, which K.T.B. acquired from the French banking giant just a week before the run. Credit Agricole Bulgaria, which is in the process of changing its name, will be nationalized and reopened on July 21, the central bank said.

"We cannot continue to fill a barrel without a bottom, as the wise Bulgarian people say," the central bank said in a statement. "The Bulgarian National Bank together with the government will concentrate on the restructuring and rehabilitation of the 'good part' of Corporate Commercial Bank to protect the interest of all its depositors. …

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