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ECB to oversee Bulgaria banks

July 15, 2014

Bulgaria has asked the European Central Bank to take over supervision of the country's banks, a week after the collapse of its fourth-largest bank and amid accusations of lending fraud by its major shareholder.

Schlange vor Filiale der Corporate Commercial Bank in Sofia, Bulgarien
Image: Reuters

Bulgaria announced on Monday that it would seek to join the EU's new 'banking union' a few days after the collapse of Corporate Commercial Bank (CCB), the country's fourth-biggest lender, amid accusations of corrupt lending practices.

"There is full consensus for an immediate start of procedures for Bulgaria's entry into the Single Supervisory System of the European Union as a first step to joining the EU's banking union," President Rosen Plevneliev said on Monday in Sofia, the country's capital.

If the EU approves Bulgaria's application, the European Central Bank (ECB) will take over supervision of Bulgaria's banks along with those of other members of the new banking union on November 4.

Bulgaria would be the first country that does not use the euro as its currency to join the banking union. But the country's currency, the leva, is already tied to the euro through an IMF-led currency board arrangement that pegs the leva to the euro at a fixed exchange rate.

The leaders of the main political parties in Bulgaria's parliament agreed to apply for acceptance into the EU's banking union at a Monday crisis meeting with central bank and government officials in Sofia.

They also agreed to hold most CCB depositors harmless by transferring their deposits to Credit Agricole Bulgaria (CAB), a small subsidiary of CCB that the lender had recently acquired from France's banking giant Credit Agricole. CAB will be nationalized.

Bulgarian deposit insurance ensures that deposits up to 100,000 euros are guaranteed when a bank fails. The government confirmed that it had the resources to fulfill the commitment.

nz/ng (AFP, Reuters)