Bulgaria’s central bank issued a dramatically-worded statement on Friday warning of “an attempt to destabilise the state through an organised attack against Bulgarian banks” after the country saw its second bank run in a week.

While the banking sector as a whole is well-capitalised, the manner in which two major financial institutions have been hit raises serious concerns about the country and poses risks to its economy.

Depositors withdrew 800m levs ($556m) on Friday from First Investment Bank, the country’s third largest lender, equal to 10 per cent of its asset base, Tereza Trifonova, an investment analyst at Sofia-based First Financial Brokerage House, told beyondbrics. Queues formed outside FIBank branches and ATMs a week after the Bulgarian National Bank took control of Corporate Commercial Bank (Corpbank or KTB), another major domestically-owned institution, after a run by depositors.

The BNB’s dramatic statement underlines concerns that a market-wide bank run could put pressure on Bulgaria’s currency board, which pegs the lev to the euro and has underpinned macroeconomic stability since the country’s 1997 financial crisis, when several banks collapsed.

Tsvetlin Yovchev, the interior minister, said text messages and emails from unknown sources were sent to some FIBank customers suggesting the bank was in trouble. A meber of the ruling party said in a TV interview on June 26 that “someone is trying to pull down another bank, as far as I feel”.

Tzvetan Vassilev, the owner of KTB, has blamed press reports and allegations that he ordered the assassination of a controversial politician for his bank’s seizure by the authorities.

So far, the attacks seem narrowly targeted rather than general. The industry’s capital adequacy ratio of 20 per cent indicates that the system as a whole is fairly sound, in spite of non-performing loan levels expected to creep above 18 per cent this year.

“There is speculation that this is an attempt to destabilise the entire system, the economy and banking system,” says Trifonova. “I hope to believe that the system is more or less under control. People have seen that they can still get their money from FIBank, which will reassure other depositors. We don’t expect BNB will act in the same way with FIBank as it did with KTB, as it’s a different case – for the moment FIBank can meet the withdrawals. But this seems to be something organised, someone trying to topple the system.”

For most of Bulgaria’s post-communist history, there have been concerns about murky ties between business and politics. With an election due in the autumn but the government limping along, tens of millions of euros of EU funding suspended and a long-standing reputation for malpractice and corruption, Bulgaria can ill-afford a crisis in what has, for over a decade and a half, been a remarkably stable and functional economic system.

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