Bulgarian banks had a very unpleasant week as people nationwide lined up to withdraw the entirety of their account balances. Panic set in throughout the country that banks may be unstable — and it was all orchestrated by a small criminal organization.
The criminal organization took "actions undermining the banking system," said local police, as "[the criminals] spread false information that caused detriment to commercial banks and destabilized the banking system." The spreading of information came in the form of mass text messages, emails, and phone calls.
The group targeted different banks at different times. Corpbank, Bulgaria's fourth largest lender, suffered a major run a week ago. Because so many withdrawals were made so quickly, the bank had to be put under specialized bank supervision. Later that week, First Investment Bank experienced a similar run. On Friday, about $558 million was withdrawn in just a few hours. Because of this massive run, FIB had to close early that day, and remain closed throughout the weekend. This sent bank shares plummeting 23 percent.
This was essentially a falsely created bank crisis. Bulgaria actually has sufficient bank reserves, and has not experienced any major economic shifts recently. President Rosen Plevneliev, assured his citizens of this, "there is no banking crisis but a crisis in confidence and criminal attacks. We have sufficient reserves, means and tools to deal with any attempt at destabilization, and we stand behind each bank that becomes the target of an attack."
Outside organizations have also worked to calm the Bulgarian people. The EU Commission reassuring people that "the Bulgarian banking system is well capitalized." Petar Ganev, an expert at The Institute for Market Economics in Sofia, explained, "The banking system is stable... and the credit rating of the country remains high despite the current panic. Bulgarian banks maintain liquidity, which is higher even than European banks."
Thus far, five people have been arrested for involvement with the spreading of this false information, and two more are detained.
This article is from the archive of our partner The Wire.