Bulgaria raises risk buffers for 10 banks (updated)

First Investment Bank AD

05/11/2018 15:16

(Adds detail, background)
    SOFIA, Nov 5 (Reuters) - Bulgaria's central bank said on
Monday that 10 banks it regards as systemically important to the
Black Sea state would have to adopt extra capital buffers as
Sofia seeks to join the euro.
    The central bank is increasing existing buffers for these
banks by 0.25 percentage points as of Jan. 1, 2019 in a move
that bankers and analysts said would not require them to raise
additional capital.
    Bulgarian banks, 70 percent of which are owned by European
Union lenders are already well capitalised. Their average core
tier one capital ratio was 19.3 percent in June, above the total
capital requirements of 10 percent, central bank data showed.   
        
    The European Central Bank (ECB) has resisted granting
Bulgaria a fast track to euro membership, saying its banks
require tougher supervision before it can join the European
Union's single currency bloc. 
    In a compromise move, Sofia agreed to join the banking union
first, giving the ECB supervision over its biggest lenders and
adding about a year to the accession process. urn:newsml:reuters.com:*:nL8N1U869H 
    Under the plan, the ten banks require additional buffers of
between 0.25 percent and 0.75 percent of total risk exposure,
the country's central bank said.
    In December the central bank set buffers of between 0.125
percent and 0.5 percent of total risk exposure for 11 lenders as
of the beginning of this year.
    Four of the country's largest lenders, UniCredit Bulbank
 CRDI.MI , DSK Bank, controlled by Hungary's OTP  OTPB.BU ,
locally-owned First Investment Bank  5F4.BB  and the unit of KBC
 KBC.BR  will now have to adopt additional buffers of 0.75
percent, it said on Monday.
    Another four will need to have additional capital buffers of
0.5 percent as of next year, while two banks will have to add
capital buffers of 0.25 percent.
    The buffers for systemically important institutions will
have to be gradually increased to 0.5 percent and 1.0 percent by
2020, the central bank added.
    Sofia has made a number of commitments, including
cooperating with the ECB, so that next July it can join both the
banking union and ERM-2, the two-year obligatory precursor
mechanism to joining the euro.
    The ECB is expected to carry out an asset quality review and
stress tests on the Balkan country's banks before it gives its
nod for entry. This process may take a year, but possibly
longer, depending on Bulgaria's progress.  

 (Reporting by Angel Krasimirov; additional reporting by Balazs
Koranyi and Tsvetelia Tsolova; editing by Alexander Smith)
 ((mailto:angel.krasimirov@thomsonreuters.com; +359 888 695
510))