Steve Hanke Recommends Bankruptcy for Bulgaria’s Troubled Corpbank

Professor Steve Hanke has spoken in favor of a bankruptcy scenario for Bulgaria’s troubled Corporate Commercial Bank (KTB).

In a Sunday interview for the Bulgarian National Radio, Hanke, a Professor of Applied Economics at the Johns Hopkins University in Baltimore, advisor to former President Petar Stoyanov and architect of Bulgaria’s currency board system, commented that the case of KTB reminded him of Bernie Madoff's Ponzi scheme.

KTB, Bulgaria’s fourth largest lender, was placed under conservatorship by the Bulgarian National Bank (BNB) on June 20 after more than a fifth of its deposits were withdrawn in a week.

Hanke suggested that a bankruptcy was a good option for KTB, adding that he was not acquainted with the audit reports of the bank. “Generally speaking, I believe that declaring bankruptcy is an appropriate measure in KTB’s case. This means that the burden will be on the owners of the bank and the ones who took out loans from it,” Hanke stated.

He expressed hopes that KTB would have sufficient resources to at least repay deposits of up to EUR 100 000, which are fully guaranteed by the state under Bulgarian law. He underscored that the liquidation of KTB would make the owners and debtors foot the bill, while the available assets would be used to pay depositors. Hanke insisted that there was no indication of a systemic problem and the bank had to be allowed to go bankrupt.

He also noted that he had carefully examined Bulgaria’s banking regulation laws last summer, adding that he had found that they were probably the toughest in Europe, save for two exceptions.

Hanke said that he had warned Ivan Iskrov, Governor of the Bulgarian National Bank (BNB), at that point that bank supervision and the application...