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Bulgaria tightens bank capital, liquidity requirements

Thu, Oct 07 2010 10:29 CET

byDnevnik.bg

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Bulgaria tightens bank capital, liquidity requirements

Photo: Julia Lazarova

Bulgarian banks will have to meet tougher requirements after the country’s central Bulgarian National Bank (BNB) said on October 6 2010 that it had amended three ordinances to bring them in line with European capital adequacy legislation.

The aim is to mitigate banking sector risk, improve risk management and step up oversight.

One of the changes adopted by BNB seeks to restrict excessive concentration of loans into one company or group.

The change to Ordinance №7 reduces the preferences offered to banks for reporting of the so-called large exposure. Only certain high-liquidity receivables with low credit rating have been excluded from the new system.

To ensure extra protection against excessive concentration of exposure, Bulgarian banks’ exposure to their parent companies or other subsidiaries of the group will be included only partially, according to the ordinance.

Under the amended Ordinance №8, Bulgarian banks will have to comply with restrictions on counting termless hybrid instruments such as warrants and convertible bonds into their primary capital.

Changes to Ordinance №11 will require lenders to maintain buffers to make sure they can more easily handle liquidity difficulties caused by economic deterioration. The size and composition of liquidity buffers and positions will be based on stress test results.

Source: Dnevnik.bg

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