Bulgaria's central bank starts health checks on banks

First Investment Bank AD

15/02/2016 13:27

SOFIA, Feb 15 (Reuters) - Bulgaria's central bank on Monday 
launched an independent asset quality review of commercial banks 
in an effort to restore trust in the banking system after the 
collapse of its fourth-largest lender in 2014. 
    The central bank has approved auditors who will check the 
credit portfolios of the 22 banks that operate in the Balkan 
country under European Central Bank methodology that has been 
adapted to the Bulgarian banking sector's size and specifics. 
    Following the review, the central bank will carry out stress 
tests on the banks at the end of July to check their ability to 
absorb unexpected losses from hypothetical shocks and establish 
whether lenders would need to bolster their capital. 
    The results of both the review and the stress tests will be 
published on Aug. 13, the central bank said in a statement. 
    Central Bank Governor Dimitar Radev has said he expects the 
assessment will confirm the stability of the Bulgarian banking 
sector, and that the central bank is ready to address any 
problems if they occur.     
    The banks' total capital adequacy stood at 22.3 percent at 
the end of September last year, while their liquidity was 34 
percent, central bank data showed. 
    Radev has said Bulgaria is much more prepared to deal with 
any banking situation than it was in 2014, when a bank run led 
to the collapse of Corporate Commercial Bank and triggered the 
country's biggest financial crisis since 1990s.  
    A Bulgarian court has declared the bank insolvent and opened 
bankruptcy proceedings after an international audit showed major 
failings in the way the lender was run that prompted a writedown 
of two-thirds of its assets. 
    Corpbank's demise forced the government to pay out 3.6 
billion levs ($2.06 billion) to guaranteed depositors and spiked 
the country's fiscal deficit to 5.8 percent of GDP in 2014.     
    Since then Sofia has adopted relevant EU legislation for 
bank restructuring. The finance ministry plans to raise up to 
5.3 billion levs ($3.03 billion) this year, part of which will 
be to set aside liquidity buffers for the banks. 
    Bulgaria's biggest banks include Unicredit Bulbank, part of 
Unicredit Group  CRDI.MI ; DSK Bank, a unit of Hungary's OTP 
Bank  OTPB.BU ; Bulgaria's First Investment Bank  5F4.BB  and 
UBB, controlled by National Bank of Greece  NBGr.AT .         
    ($1 = 1.7472 leva) 
 
 (Reporting by Tsvetelia Tsolova) 
 ((tsvetelia.tsolova@thomsonreuters.com; +359-2-93-99-731;)) 
 
Keywords: BULGARIA BANKS/