Source says Oman's biggest sovereign wealth fund has started legal action over collapse of Corpbank
Oman's biggest sovereign wealth fund has started legal action against the Bulgarian government over the collapse of Corporate Commercial Bank (Corpbank), a source at the fund told Reuters on Wednesday.
Oman's State General Reserve Fund owned a 30 percent stake in the Balkan country's fourth-biggest lender, which was felled by a bank run and shut down by the central bank, triggering the country's worst financial crisis since the 1990s.
News of the legal action came as a Bulgarian parliament commission on Wednesday accused the main shareholder of running Corpbank as a pyramid scheme under the lax supervision of the central bank and the intelligence service.
Corpbank's main owner, a Bulgarian tycoon called Tsvetan Vassilev, has been charged with embezzlement since the bank run and an independent audit ordered by the central bank forced Corpbank to write off nearly two-thirds of its assets. Insolvency proceedings in Bulgaria are ongoing.
A consortium of investors including the Omani fund had submitted proposals for rescuing Corpbank in October, but a month later the central bank stripped the lender of its licence and ended any chance of a turnaround.
"The arbitration is in European courts", said a source at the fund, speaking on condition of anonymity. "Our demands are to get the book value of our investment as per the day the bank was stopped as well as interest," the source added, declining to give further details.
The Bulgarian finance ministry did not respond to a request for comment.
The run on Corpbank started after reports of shady deals at the lender surfaced and amid a public dispute between Vassilev and a business rival. Vassilev, who is in neighbouring Serbia and awaiting a court decision on whether to extradite him, has denied any wrongdoing and said the bank run was a plot hatched by his competitors in collusion with some state officials.
The fallout continues. Prosecutors have charged two auditors from the Bulgarian unit of consulting firm KPMG with not reporting shortcomings in Corpbank's activities. KPMG did not comment on the charges. Two former central bank deputy governors are also being investigated. They have denied wrongdoing.
The parliament commission's report said more than two-thirds of Corpbank's loans were extended to firms linked to Vassilev or to shell companies, echoing the findings of the audit commissioned by the Bulgarian National Bank (BNB).
"The bank is one financial pyramid with its majority owner at the top," said Snezhana Dukova, a member of the commission that was set up in March, accusing regulators of being "asleep".
The report said Corpbank could not profit from the loans it was extending to favoured parties, meaning it was forced to raise funds by offering interest rates to depositors that were double the average rate for the sector in Bulgaria.
"Failure to address these practices at Corpbank has allowed the bank to function as a pyramid scheme. Here lies the big responsibility of its main shareholder Tsvetan Vassilev, the management of the bank as well as of the banking regulator BNB," the report said.
The Corpbank saga has soured relations between lawmakers and the central bank. Central Bank Governor Ivan Iskrov tendered his resignation in June, months before his term is due to end, and hearings to choose a successor are ongoing. Iskrov last year accused parliament of using the crisis as a "political toy".For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.