Bulgarian central bank to handle Corpbank

SOFIA, June 21 (Reuters): A run on Corporate Commercial Bank (Corpbank) prompted Bulgaria's central bank to take control of the country's fourth-largest lender on Friday and its governor appealed to depositors to stay calm.

The Bulgarian National Bank (BNB) said it would handle Corpbank's operations for three months and removed its management and supervisory board after the run, which was sparked by media reports of shady deals involving the bank.

The BNB said it acted after Corpbank said on Friday morning it had stopped all payments and bank operations due to a liquidity drain. The central bank said Corpbank was not bankrupt and other lenders in the country were safe from the effects.

"As you know, there has been a lot of talk about the bank and one of its shareholders, which triggered bank runs," central bank governor Ivan Iskrov said at a news conference. "It is very important to be very careful when we talk about banks. Let's not tear down our house alone unnecessarily."

"Let me make this very clear. Corporate Commercial Bank is not a bankrupt bank. We are acting swiftly to avoid a bankruptcy," said Iskrov.

He declined to give further details of the bank's problems and said supervisors would carry out a full audit of its books.

The central bank action did not stop dozens of people from queuing outside the main office of the bank in the capital Sofia on Friday, and credit default swaps on the country's debt hit a six-month high on fears of contagion. Sofia's blue-chip shares index closed at its lowest level since February.

The central bank blocked depositors from withdrawing cash after it took control.

"We are worried, because my husband and I have deposits there in euros and in US dollars," said Lilia Polova, editor at a lifestyle magazine. "These are our family savings. He was reading newspapers and was asking me to take our money out of there ... but I waited."

Bulgaria's stock exchange suspended Corpbank from trading and the country's financial regulator ordered that the shares remain suspended until Wednesday next week in order to protect investors and stabilise the market.

Iskrov said Corpbank depositors stepped up withdrawals after an anonymous letter leaked to Bulgarian media said the central bank's deputy governor in charge of banking supervision was being investigated by prosecutors for abuse of office.

The central bank has since confirmed the investigation and said the deputy governor had taken a voluntary leave of absence.

Reports in Bulgarian media linked the investigation of the deputy governor to allegations of corruption at Corpbank.

In an interview with a Bulgarian TV news channel, whose contents were published by Corpbank on Thursday, Corpbank's top shareholder Tsvetan Vassilev denied any wrongdoing on his part or the bank's.