Customers have continued to queue outside Bulgaria’s First Investment Bank to withdraw savings, despite reassurances from the president and a recovery of the lender’s share price.
After a run on another of Bulgaria’s banks, Corporate Commercial Bank, the central bank took control of the bank and suspended both its banking operations and trading in shares in the lender.
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Moving to quell panic amongst depositors, president Rosen Plevneliev said: "The money of citizens and companies invested in the banking institutions of Bulgaria are safe and guaranteed.
"The banks will continue to operate in a normal regime."
Following the announcement, shares in First Investment Bank leapt 33.94%, bouncing back from a plunge of 24% on Friday.
Plevneliev’s reassurances came after in-depth talks with the finance minister and the central bank, which has blamed the bank runs on what it says is a concerted phone and internet campaign spreading malicious rumours about the strength of the Bulgarian banks.
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By GlobalDataThe authorities in the country have so far arrested five people in an investigation into the alleged smear campaign.
Despite some customers continuing to queue to withdraw their savings, queues in the capital city Sofia are thought to be about half the length they were on Friday outside some branches.
In an additional piece of good news for the embattled banks, the European Commission has extended a credit line of BGN3.3bn ($2.30bn) to support them.
"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.
The Commission added that 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."
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