Bulgaria Arrests Five Men Amid Efforts to Stop Run on Banks

[Slimprofits]

Bulgarian police detained five men in connection with an alleged organized attack on the financial system as the eastern European nation’s government moved to stop the worst run on banks in 17 years.

Police arrested four men in the capital, Sofia, and another in the city of Rousse on the Danube River, on suspicion of spreading “false, ill-intended information against Bulgarian banks to destabilize the banking system,” the State Agency for National Security said today on its website.

The detained men used “mobile phone and e-mail messages and social media, including Facebook and YouTube, to spread the rumors prompting people to withdraw bank deposits,” the agency said. It claimed some of the men owed large amounts of money to banks, and the agency is making further investigations.

Bulgarian central bank Governor Ivan Iskrov said on June 27 that the financial industry is under organized attack by anonymous e-mails, texts and rumors, threatening the country’s security. First Investment Bank AD, the country’s third-biggest lender by assets, was the target of an “epidemic of rumors and libelous public statements,” Iskrov said.

First Investment paid 800 million lev ($558 million) to clients on June 27, the bank said on its website, adding that it has “enough money in cash and financial instruments” to meet demand. A week ago the central bank placed under supervision Corporate Commercial Bank AD, the country’s fourth largest, after a big depositor pulled out his funds.

Minister’s Plea

Bulgaria’s Finance Minister Petar Chobanov appealed to politicians yesterday to refrain from attacks on the banking system in their campaigns, after the ruling Socialist party has come under pressure to release the reins of government following its poor showing in European Parliamentary elections on May 25. The vote was won by the Gerb party of Former Prime Minister Boyko Borissov, who now seeks re-election.

Parliamentary parties agreed to hold early elections on Oct. 5, three years ahead of scheduled polls. Political leaders are meeting with President Rosen Plevneliev today to plan the time for the government of Prime Minister Plamen Oresharski to resign, when to dissolve Parliament and appoint an interim cabinet.

“The overemotional political messages of Gerb leader Boyko Borissov lead to destabilization of the country,” Chobanov said yesterday in a live broadcast on National Television. He said they have become “uncontrollable and incompetent statements on such sensitive subjects as the financial security and stability of the country. This kind of political pressure on society causes panic.”

‘Catastrophic State’

Chobanov was responding to a statement made by Borissov in an interview yesterday with Nova television in Sofia that Bulgaria’s “finances and bank system are in a catastrophic state as a result of this government’s rule.” He added that “when the finance minister says the banks are stable, in the language of Bulgarians it means disaster is imminent.” Borissov was reiterating statements made throughout the week.

Last week, Bulgaria sold 1.49 billion euros of 10-year Eurobonds with a 2.95 percent annual coupon, the country’s “lowest ever,” the Finance Ministry said June 27. The country’s public debt, at 18 percent of gross domestic product, is far below the euro-area average of 96 percent.

Bulgaria’s banking system is 85 percent-owned by foreign lenders, including UniCredit SpA (UCG) and Raiffeisen Bank International AG. (RBI) The nation’s banks had total profit of 306 million lev on April 30, up from 211 million lev a year earlier. The total capital adequacy ratio was 20 percent on March 30, with a first-tier capital adequacy of 18 percent, according to central bank data.

http://www.bloomberg.com/news/2014-0...-on-banks.html

By Elizabeth Konstantinova Jun 29, 2014 8:23 AM ET

[Mega]

Re: Bulgaria Arrests Five Men Amid Efforts to Stop Run on Banks

Good eveing Slim
Jim rickards is running with this on his twitter a/c........thinks its "practice run" for something else.
Mike

[GRG55]

Re: Bulgaria Arrests Five Men Amid Efforts to Stop Run on Banks

Good eveing Slim
Jim rickards is running with this on his twitter a/c........thinks its "practice run" for something else.
Mike

"...The detained men used “mobile phone and e-mail messages and social media, including Facebook and YouTube, to spread the rumors prompting people to withdraw bank deposits,” the agency said. It claimed some of the men owed large amounts of money to banks, and the agency is making further investigations..."

Let me guess. These guys were doing God's work because Goldman's prop desk had a levered short on those bastions of good corporate governance, the Bulgarian banks.

[Slimprofits]

Re: Bulgaria Arrests Five Men Amid Efforts to Stop Run on Banks

Good eveing Slim
Jim rickards is running with this on his twitter a/c........thinks its "practice run" for something else.
Mike

I do not know anything about Bulgaria. I am curious though about just how interconnected are these Bulgarian banks? Or we will be surprised to hear about a mega-firm going down because of losses in Bulgaria?

Bulgaria’s banking system is 85 percent-owned by foreign lenders, including UniCredit SpA (UCG) and Raiffeisen Bank International AG.

[don]

Re: Bulgaria Arrests Five Men Amid Efforts to Stop Run on Banks

Follow the . . . Oil?

Europe Gives Bulgaria A Bank System Lifeline As Battle Over "South Stream" Pipeline Heats Up

As reported a week ago, as a result of various political developments (and potentially other reasons, still unknown) the poorest EU country, Bulgaria, suddenly found itself gripped by the worst bank run it has suffered in 17 years, when first its fourth largest bank, Corpbank, was nationalized, followed by a second bank run slamming its third largest bank, Fibank. Promptly thereafter, in an attempt to preserve calm, Bulgaria’s central bank issued a dramatically-worded statement on Friday warning of “an attempt to destabilise the state through an organized attack against Bulgarian banks” coupled with the issuance of €1.5 billion in 10 year bonds at a 3.055% yield, to demonstrate that the country still has access to capital markets (in the biggest bond bubble in history that is a given) and has liquidity.

Alas since that too failed to preserve calm in a country in which even the leader of the opposition (which has every interest in destabilizing the economy) piled on and said the banks are essentially insolvent, Bulgaria resorted to arresting two menwho were suspected of involvement in what they have described as an organized attempt to destabilise the country's financial system by encouraging citizens to withdraw bank deposits.

Which brings us to today, when moments ago, Reuters reportsthat the European Commission said on Monday it had approved a Bulgarian request to extend a credit line of 3.3 billion levs ($2.30 billion) in support of banks that have come under speculative attack.

“The Commission concluded that the state aid implied by the provision of the credit line is proportionate and commensurate with the need to ensure sufficient liquidity in the banking system in the particular circumstances,” the EU executive said in a statement.

The statement said Bulgaria’s banking system was “well capitalised and has high levels of liquidity compared to its peers in other member states. For precautionary reasons, Bulgaria has taken this measure to further increase the liquidity and safeguard its financial system”.

The move follows runs by jittery depositors on two major Bulgarian commercial banks in the space of a week.

And while this latest backstop of the Bulgarian bank system should provide a respite from bank insolvency fears (if only for the time being), one wonders.

Recall that as we explained earlier, Bulgaria is the critical first European leg of the Russian "South Stream" pipeline as it emerges from the Black Sea: a pipeline which the European Commission has sternly objected to, yet which Russia recently signed a deal with Austria (which balked at European demands to isolate Russia) to activate.



Which means that with Austria siding with Russia, Europe has to isolate and convert the "feeder" countries, those which the South Stream crosses on its way to central Europe.

Ludicrous? Not really.

Recall that it was in January, two months before the Ukraine government was overthrown that the prime minister of Bulgaria - a country that has a very distinguished love/hate relationship with Russia (a relationship which the US would love to make more "hate") - Plamen Oresharski, surprisingly ordered a halt to work on the South Stream, on the recommendation of the EU. The decision was announced after his talks with US senators.

"At this time there is a request from the European Commission, after which we've suspended the current works, I ordered it,"Oresharski told journalists after meeting with John McCain, Chris Murphy and Ron Johnson during their visit to Bulgaria on Sunday. "Further proceedings will be decided after additional consultations with Brussels."

At the time McCain, commenting on the situation, said that "Bulgaria should solve the South Stream problems in collaboration with European colleagues," adding that in the current situation they would want "less Russian involvement" in the project.

"America has decided that it wants to put itself in a position where it excludes anybody it doesn't like from countries where it thinks it might have an interest, and there is no economic rationality in this at all. Europeans are very pragmatic, they are looking for cheap energy resources - clean energy resources, and Russia can supply that. But the thing with the South Stream is that it doesn't fit with the politics of the situation," Ben Aris, editor of Business New Europe told RT.

It was also in January when EU authorities ordered Bulgaria to suspend construction on its link of the pipeline, which is planned to transport Russian natural gas through the Black Sea to Bulgaria and onward to western Europe. Brussels wants the project frozen, pending a decision on whether it violates the EU competition regulations on a single energy market. It believes South Stream does not comply with the rules prohibiting energy producers from also controlling pipeline access.

Therein, of course, lies the rub, because as Europe has learned the hard way so many times, its overrliance on Russia for both the production and the transit of gas means that it has absolutely no leverage over the Kremlin - something recent events in Ukraine have only confirmed.

“They do everything to disrupt this contract. There is nothing unusual here. This is an ordinary competitive struggle. In the course of this competition, political tools are also being used,” the Russian president said after holding talks with his Austrian counterpart, President Heinz Fischer, in Vienna.

So, one wonders: will a key condition for this $2.3 billion "rescue" loan be that Bulgaria turn its back on Putin, halt the South Stream permanently, and block any further work on what has suddenly become Europe's most important pipeline alternative - one which makes Ukraine (and all western investment therein) the most irrelevant country in Europe (asexplained earlier today).

One also wonders if the recent escalation of troubles in Bulgaria's banking sector were not, perhaps, Brussels inflicted. After all, who had the most to win from a financial, economic and political crisis in the country?

Finally, one wonders if the above is true, and this is merely the latest act in a play starring Russian gas (as was the case with Syria and Ukraine, and so on) just how much deeper will the Bulgarian crisis will escalate until Europe gets its way, and - alternatively - just when and under what conditions will Putin step in with his own counterproposal?

[vinoveri]

Re: Bulgaria Arrests Five Men Amid Efforts to Stop Run on Banks

any bank failing is no longer a consequence of any free market or economic force, but purely a political decision; Sovereigns and Central banks can generate unlimited liquidity allowing any loan to be rolled over ... essentially "forever" ... and thus there need be no insolvency. If the bank is allowed to fail, it is b/c the CBs decide to let it go. For goodness sake, does anyone remember the Greek (and European) debt crisis only a short 4 years ago.
Ridiculous, all this talk of insolvency .... it doesn't matter anymore ... if you're connected or somehow "systemically important"

[Slimprofits]

Re: Bulgaria Arrests Five Men Amid Efforts to Stop Run on Banks

The government announced on Monday a precautionary credit line of 3.3 billion levs ($2.31 billion) in state aid, scrambling to shore up banks after Bulgarians flocked to two local lenders to withdraw savings. The finance ministry sold treasury notes to raise a first tranche of 1.2 billion levs.

"There is no liquidity drain from any bank," Prime Minister Plamen Oresharski told reporters in parliament. "The buffer that the finance ministry secured ... has not been used. This points to the fact that confidence has been restored."

An official of the International Monetary Fund and the head of Austria's central bank also said Bulgarian banks were sound. UniCredit Bank Austria and Raiffeisen Bank International have large operations in Bulgaria.
http://www.reuters.com/article/2014/...0PD3CH20140702