Bulgaria’s Government gave on October 26 its approval for the Finance Ministry to terminate a deposit contract with First Investment Bank (FIBank), signed as part of a state aid programme in November 2014.
The state aid was approved by the European Commission, which said that the measures taken by Bulgaria at that time – in response to a run on the bank triggered by an online smear campaign – were necessary to preserve the financial stability of the Bulgarian economy and financial system.
The money was contingent on FIBank carrying out a restructuring plan, which the lender completed in May, paying back the last of the state aid, meeting all Commission-approved guidelines and deadlines. With no further contractual obligations for FIBank to meet, the contract could now be dissolve, the Cabinet’s media office said.
Following the bank run in June 2014, Bulgaria granted liquidity support to FIB in the form of a state deposit of 1.2 billion leva (about 0.6 billion euro), as part of a Bulgarian liquidity scheme approved by the EC.
Due to Bulgarian Treasury constraints at the time, this deposit had a short maturity of five months expiring on November 28 2014. At that point, Bulgaria extended the term of the deposit by a further 18 months, while its size was decreased to 900 million leva.