The NYT: Political Crisis Jeopardizes Future of Bulgarian Bank

Views on BG | July 25, 2014, Friday // 14:22
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One of the biggest banks in Bulgaria is a "hostage" to a political crisis, which caused Bulgarian PM Plamen Oresharski to resign, writes Georgi Kantchev for The New York Times.

There may be no rescue plan or resolution to the problem with the Corporate Commercial Bank (KTB) soon, as the "worst banking crisis since the 1990's" threatens to hurt business. Foreign-owned banks such as UniCredit Bulbank have remained unaffected by the turmoil.

The main opposition party - GERB - is expected to win the elections scheduled for the October 5. Because of the bank crisis, the party has demanded the resignation of the governor of the Bulgarian National Bank Ivan Iskrov.

After the rescue option to bail out KTB was rejected by parliament, the focus was moved onto private investors who could save the bank. Oman's sovereign wealth fund, which holds 30% of the bank's shares has refused to comment, KTB's second-largest investor - Russia's VTB bank which holds 9% of KTB said that it doesn't have any plans to provide liquidity and capital resources to KTB.

To ease fears of a full-blown bank crisis, the Bulgarian government has sought to join the central European Supervisory Mechanism. If it is accepted, it would be the first country outside the 18 members of the Eurozone to be supervised this way, however some analysts fear the supervision will not actively begin until next year. 

Most analysts agree that the Bulgarian bank system is sound with the highest capital reserve ratios in Europe (20%), but letting KTB fail could trigger a snowball effect that could scare away foreign investors for good.

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Tags: The New York Times, Bulgaria, KTB, crisis, resignation, Plamen Oresharski, PM
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