Bulgaria’s caretaker Finance Minister Roumen Porozhanov said on August 29 that the country was ready to submit to the European Commission the restructuring plan required by the EC as a condition for approving state aid in Bulgaria’s banking sector.
Appearing on the breakfast TV show of private broadcaster bTV, Porozhanov spoke in general terms, without naming the lender that received liquidity assistance under the 3.3 billion leva credit line approved by the Commission, but it is understood that he was referring to First Investment Bank (FIBank).
FIBank, Bulgaria’s third-largest lender with assets worth 8.84 billion leva (about 4.52 billion euro) at the end of June, became the target of a bank run on deposits on June 27 and briefly halted customer operations to replenish liquidity, resuming normal operations on June 30. At the time, the bank said it was the target of an “unprecedented criminal organised campaign of rumours and public statements”.
The lender later received 1.23 billion leva in state aid under the credit line approved by the EC, with the government raising the money by issuing five-month government bills sold on the domestic market.
The EC made its approval contingent on Bulgaria’s agreement “to provide the Commission individual restructuring or liquidation plans, within two months, for banks which use the measure described in this decision.”
That deadline is August 29 and Porozhanov said that the restructuring plan has already been submitted by the “bank that received liquidity assistance” and it was discussed with the Bulgarian National Bank and the Finance Ministry on August 28. He said that the proposal would be forwarded to the European Commission’s directorate-general for competition by the end of the day on August 29.
Porozhanov said that he expected the talks on the proposal to last “at least two months” before a final version is approved by the European Commission. After that, the recipient of the state aid will have about 18 months to restructure its loan portfolio and lending policies in line with the EC-mandated plan, Porozhanov said.