Bulgaria sells 1.23B leva of government bills

Bulgaria’s Finance Ministry has said that it sold 1.23 billion leva (about 629 million euro) worth of five-month government bills on the domestic market on June 30, raising additional funds in case it needs to use a credit line to boost liquidity of local lenders.

“This secures the first tranche for a liquidity buffer for reaction to speculative attacks against several Bulgarian banks,” the Finance Ministry said in a statement. “The funds raised by this issue have been added to existing Budget buffers to ensure unconditional support for liquidity in the Bulgarian banking sector and its continued calm and smooth operation.”

The bills auction happened on the same day that the European Commission announced that it approved the use of a 3.3 billion leva credit line, meant to ensure sufficient liquidity in Bulgaria’s banking system. The proposed measure was in line with EU’s rules on state aid, the Commission said.

The average yield to maturity on the new issue was 0.83 per cent, the Finance Ministry said in a statement late on July 1. This puts the annual yield at more than 1.8 per cent – triple the annual yields on short-term government debt sold on the domestic market in January, when the ministry sold 400 million leva worth of six-month bills at an annual yield of 0.6 per cent and another 400 million leva worth of nine-month bills at an annual yield of 0.58 per cent.

Reports in Bulgarian media earlier in the day, before the ministry announced the results of the auction, claimed various values for the annual yield – ranging between 1.2 per cent and 1.7 per cent.

The ministry also said that “the urgent and well-coordinated actions by the government, Bulgarian National Bank and the financial community resulted in a categorical rebuff to all groundless speculation and insinuation, restoring public confidence in the banking system.”

On June 27, Bulgaria’s third-largest lender First Investment Bank (FIBank) said that it was the target of an “unprecedented criminal organised campaign of rumours and public statements”, which prompted a bank run on deposits. The bank suspended operations with customers over the weekend to replenish its liquidity and re-opened for business on June 30.

The central bank and the government gave immediate assurances that they would not allow any losses to depositors – a sore issue in Bulgaria, where the 1996/97 bank crash and subsequent hyperinflation wiped out the savings of millions – but there have been no statements to clarify whether FIBank required aid from the government or the central bank.

Meanwhile, Bulgaria’s Financial Supervision Commission (FSC) has said that it started proceedings to revoke the licence of investment intermediary Global Markets Ltd for “systematic and continuous breaches” of Bulgaria’s law on financial markets. Bulgaria’s State Agency for National Security (SANS) said on June 29 that it detained two employees of an unnamed investment intermediary that sent “hundreds of messages” concerning threats to the banking sector.

Although neither FSC, nor SANS officially identified the company as the one attempting to engineer the bank run on FIBank, reports in Bulgarian media made that connection between the statements issued by the two institutions.

(Photo: M van den Dobbelsteen/sxc.hu)



The Sofia Globe staff

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