Bulgaria heads for prison law on rumours after bank panic

(MENAFN- AFP) Bulgaria moved on Wednesday to change its penal code to allow prison sentences for anyone who sparks a bank run like the one it suffered last month.

The changes, passed by parliament, call for prison sentences of between two and five years for anyone who spreads "misleading or wrong information about a financial institution that might stir panic and fear in the population."

Anyone proved to have benefited financially from such a panic could face five to 10 years in prison.

Wednesday's move comes amid a banking scandal in Bulgaria, the European Union's poorest country, after false rumours spread in the media, via SMS messages and on the Internet in late June, prompting runs on Bulgaria's third and fourth-biggest lenders.

One of the banks - Corporate Commercial Bank (CCB) - was forced to shut temporarily.

With a central bank audit also revealing irregularities in its operations and politicians failing so far to agree to shore it up, CCB could be the first Bulgarian bank to go bankrupt since the collapse of 14 lenders in 1996-7.

The main shareholder Tsvetan Vasilev has accused a former partner and powerful deputy, whose family was for long behind a media empire, of sparking the bank run.

The SMS messages and media reports, which spread like brushfire in a matter of hours, warned that First Investment Bank and CCB were on the brink of bankruptcy and alleged massive fraud.

This caused thousands of panicked Bulgarians to withdraw up to one billion leva (511 million euros, $692 million) from CCB alone in a matter of days.

The new changes to Bulgaria's penal code must still pass a second parliament reading before entering into force. Several lawmakers warned on Wednesday that they must be carefully worded so as not to infringe on freedom of speech.