EMPLOYEES at Bulgaria’s Corporate Commercial Bank knew panic was setting in when they spotted colleagues among the anxious depositors lined up to withdraw cash from the troubled bank.

    The alarm came in part because the week before, June 13, with television news crews filming, Bulgarian state prosecutors had raided a building in Sofia that housed Corpbank offices.

    Though both the prosecutors and the bank said the raid did not target Corpbank — the building housed other companies as well — customers soon began to withdraw their savings. Within days, the central bank had seized control of the bank, the fourth-biggest lender in Bulgaria, and suspended its operations for three months.

    The dramatic raid and bank run were reminders that despite progress from the worst days of the euro crisis, parts of Europe’s financial system are still far from secure. The run quickly spread to another bank and saw Sofia announce a protective US$2.3 billion credit line. It also stoked uncomfortable memories of a 1996-97 crisis in Bulgaria, when 14 banks collapsed, and followed much more recent bank meltdowns in Ireland, Greece, and Cyprus.

    Corpbank had been adjudged safe and secure. At the end of the 2013 financial year, its books were audited by KMPG, who found less than 1 percent of its loans were nonperforming, against an average of 17 percent for Bulgarian banks. KPMG declined to comment.

    And just days before the run on Corpbank, the International Monetary Fund had praised the country’s financial sector as “stable and liquid.”

    A senior official with the International Monetary Fund has since said the problems at the two Bulgarian banks did not reflect any underlying problems in the system, which remains well capitalized and liquid.

    The country’s central bank initially blamed the bank run on media reports about Corpbank’s main owner and leaked news that a central bank deputy governor was under investigation. Central Bank Governor Ivan Iskrov called the leak a deliberate “attack” on the bank.

    Others suggested alternative reasons. Behind closed doors some government officials blamed the run on a clash between Corpbank’s main owner Tsvetan Vassilev and his political rivals, without saying who they were.

    Prime Minister Plamen Oresharski publicly blamed a “corporate clash” for the run on Corpbank, without going into specifics.(SD-Agencies)