SOFIA: Bulgaria is to allow its fourth-biggest lender to collapse and will hive off its healthy activities into a separate bank as it moves to clear up the mess from the country’s worst financial scandal since the 1990s.

The central bank said it was removing Corporate Commercial Bank’s (Corpbank) licence and alerting prosecutors to the possibility that its main shareholder stole money from the bank just before the central bank took over its operations.

Know more: Bulgaria bank run ‘halted’

The scandal broke last month when Corpbank clients unnerved by media reports accusing top shareholder Tsvetan Vassilev of shady business deals dashed to withdraw their savings.

The bank run spread quickly to another lender and saw Sofia announce a protective $2.3 billion credit line, a reminder that parts of Europe’s financial system are still far from secure despite progress from the worst days of the financial crisis.

“The results of the review of Corporate Commercial Bank speak, to put it mildly, about actions incompatible with the law and good banking practices,” the central bank said in a statement as it published the results of an audit.

It said much of the documentation to back up 3.5bn levs ($2.43bn) out of Corpbank’s total 5.4bn-lev loan portfolio was missing. The documents were, it believed “most likely destroyed in the days before the central bank sent administrators there.”

A significant part of the loan portfolio was linked to parties related to Corpbank’s main shareholder, the central bank said.

Central bank administrators found Vassilev had withdrawn 205 million levs from the bank via a third party just before the state took control. Prosecutors would need to determine whether that withdrawal amounted to theft, the central bank said.

State prosecutors said on Friday they were investigating whether Corpbank’s chief treasurer, Margarita Petrova, had taken bags of money from the bank’s vaults on Vassilev’s behalf.

Senior Corpbank executive Orlin Rusev was arrested on Friday over allegations that he ordered the withdrawal, the prosecutors said. They said they also planned to summon Vassilev.

“There are indications of a serious felony and we are investigating it,” Interior Minister Tsvetlin Yovchev told reporters. “...Obviously, money that was supposed to be in the vault (of Corpbank) is missing”.

Petrova, Rusev and Vassilev, who denies any wrongdoing, could not immediately be reached for comment. Corpbank’s spokeswoman has said the central bank has banned it from making public statements without its approval.

Published in Dawn, July 12th, 2014