Bulgarian National Bank (BNB) may raise the minimum required reserves held by banks from eight per cent to 12 or 15 per cent.

In mid-May, BNB governor Ivan Iskrov warned that if credit growth remained strong, the bank would introduce new restrictive measures.

BNB’s plans came as a surprise to specialists in the banking sector, according to Pari daily.

According to Pari's sources, BNB will make a decision on July 19 2007 at the earliest.

If the measures are implemented, the banking system would be deprived of between 1.5 and 2.6 billion leva,.

Specialists say that this is the most severe punishment the central bank could impose, because the minimum required reserves mean losses for banks.

Deposits held with BNB do not bear interest, and depreciate with inflation every year. Added to that is the revenue that banks lose from not using the money.

Bankers believe that the measure will do no more than contain the credit boom in the short term, but will bring no long-term change.