Stress tests show Bulgarian banks don't need state support -central bank (updated)

First Investment Bank AD

11/08/2016 18:56

* Bulgarian banking system stable, well capitalised as a 
whole 
    * Individual results will be announced Saturday 
    * Plans drawn to increase capital buffers for some lenders 
    * Analysts and bankers cautious, await individual results 
 
 (Adds analyst comment, background) 
    By Tsvetelia Tsolova 
    SOFIA, Aug 11 (Reuters) - None of Bulgaria's banks require 
state support but some will need to raise capital or sell assets 
to bolster their capital buffers, the central bank said on 
Thursday after stress tests on lenders.  
    The health check was the first by the Balkan country since 
it endured a banking crisis, triggered by the collapse of 
Corporate Commercial Bank (Corpbank), its fourth largest lender, 
in 2014. 
    The central bank is not due to release individual banks' 
test results until Saturday and analysts and bankers were 
cautious, saying they needed to see how each of the country's 22 
mostly foreign owned lenders fared.  
    "The Bulgarian banking system is stable," central bank 
Governor Dimitar Radev said in a statement. 
     "The main indicator of a bank's financial resilience, the 
ratio of common equity tier one capital to risk-weighted assets, 
or the CET 1 ratio, remains significantly above the required 
minimum regulatory requirements on a system level and is above 
the EU average as announced in the latest European stress test," 
he said. The results of separate stress tests on leading 
European Union banks were announced on Aug. 1.  urn:newsml:reuters.com:*:nL8N1AI3HZ 
    Following the Bulgarian stress tests the central bank drew 
up plans with some lenders to increase or maintain their capital 
buffers, it said, but did not disclose how many lenders. 
    Analysts wanted to see if there were any signs of problems 
similar to those at now bankrupt Corpbank. 
    "We knew that the system as a whole is well capitalised. 
What we did not know was how certain banks have performed and 
this we continue not to know," said economic analyst Lachezar 
Bogdanov at independent think-tank Industry Watch. 
    "The fact that not a single bank would require state support 
is good news for now, but we need to see the results." 
    An international audit of Corpbank in 2014 prompted a 
writedown of two thirds of its assets and a parliament 
commission accused its main shareholder of running it like a 
pyramid scheme and said supervision by the central bank was lax. 
    Radev was appointed central bank governor last year as part 
of efforts to boost confidence in the banking sector after the 
crisis. 
    At the start of the latest stress tests, Bulgarian banks had 
an average CET 1 capital ratio of 19.98 percent, the central 
bank data showed. That was adjusted down to 18.9 percent 
following the asset quality review as some loans or assets were 
not as strong as declared, the bank said. 
   That capital ratio would drop to 14.4 percent under an 
adverse three-year theoretical economic shock, the central bank 
said.  
    Finance Minister Vladislav Goranov welcomed the results. 
After allocating money in this year's budget to support banks if 
needed, he said that money would now be used to repay maturing 
government debt instead. 
    Corpbank's demise forced the government to pay out 3.6 
billion levs ($2 bln) to guaranteed depositors and lifted the 
country's budget deficit to 5.8 percent of GDP in 2014.  
    Its collapse also triggered bank runs at several other 
lenders, with the third-largest, First Investment Bank  5F4.BB , 
receiving 1.2 billion levs of liquidity support from the state. 
It has since repaid the funds in full.  urn:newsml:reuters.com:*:nL5N18N3PN     
    Other big lenders in the country include Unicredit Bulbank, 
part of Unicredit Group  CRDI.MI , DSK Bank, owned by Hungary's 
OTP  OTPB.BU  and UBB, controlled by National Bank of Greece 
 NGRr.AT . 
  
  ($1 = 1.7516 leva) 
 
 (Reporting by Tsvetelia Tsolova; Editing by David Evans and 
Susan Fenton) 
 ((tsvetelia.tsolova@thomsonreuters.com; +359-2-93-99-731;)) 
 
Keywords: BULGARIA BANKS/TESTS/