Bulgaria central bank cuts collateral requirements for bank funding

SOFIA, June 30 Mon Jun 30, 2014 10:25am EDT

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SOFIA, June 30 (Reuters) - The Bulgarian National Bank said on Monday that it would cut the collateral requirements for banks accessing local currency funding, easing pressure on the banks' liquidity.

Banks can now give the central bank collateral equal to as little as 110 percent of the funding they request from the central bank. Previously they needed collateral worth at least 125 percent.

The central bank said the measures were taken in the interests of preserving financial stability. The Balkan country has seen two bank runs in June and is keen to restore confidence in its financial system.

The central bank is banned from extending credits to banks in the country and can only do so in case of a liquidity risk to the stability of the banking system. Such loans cannot be extended for more than three months and need to be collateralised with gold, foreign currency or other high liquidity assets.

The central bank also said it would cut interest rates on deposits at Corporate Commercial Bank (Corpbank) - one of the banks hit by a run - to market level, without offering further specifics.

(Reporting by Tsvetelia Tsolova; writing by Laura Noonan; editing by Matthias Williams)

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