For sellers

Run on two of Bulgaria’s biggest bank positively impacts Sofia’s property market

03 July 14

Fourteen days ago rumours spread like wildfire concerning the instability of Bulgaria’s fourth largest bank, Corporate Commercial Bank (KTB). Panic amongst depositors ensued as the media heavily reported on its purported imminent bankruptcy. Simultaneously rumours began regarding First Investment Bank’s stability (FiBank - Bulgaria’s third largest bank) and on Friday 27th June in the space of just a few hours, some 800 million Leva (£326 million) was withdrawn by the queuing public and businesses alike causing a run on both banks.



Shares in FiBank dropped 23%, its share price was frozen and trading was ceased until Monday 30th June. Despite Bulgaria’s banks actually maintaining far greater liquidity than those of the UK, KTB’s board was removed and was taken over by the state for the next three months.


Apparently the result of a deliberate act to undermine Bulgaria’s banking system and the state, eight people have since been arrested. Bulgaria having Europe’s fastest internet is suspected to have assisted the criminals who seemingly bombarded depositors via text message, email and social media post promoting false rumours of imminent bankruptcy to encourage immediate withdrawals.


Despite a criminal plot to undermine the banking system, the underlying issue is not the health of the banks but actually the lack of faith the Bulgarian public have in Bulgarian institutions. Although many still bear the scars of the collapse of the entire banking system in 1997, the past 15 months has seen a tenuous government cling to power prolonging their opportunity to award ‘preferred supplier’ contracts and line their own pockets. Snap elections have been called for on the 5th October, it is widely suspected the failed coalition will not be re-elected.


Bulgaria is in an advanced stage of post-communist development; the gangsters and mafia men have left the streets, are in jail or graduated to become bonafide businessmen and politicians. The power struggle between these men and the now multibillion euro corporate giants they operate is at an all-time high.


The public have almost no confidence or trust in these institutions, the murky lines between politics and private ownership are too blurred for even the most savvy to determine conclusively. Most of the 1 bn Leva total cash withdrawals is now suspected of being hidden under mattresses or will find its way into foreign owned banks operating in Bulgaria. Much of it will quickly enter the Sofia property market as depositors look for alternative 4-5% annual returns from their money.