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SOFIA, Aug 13 (Reuters) - Bulgaria’s central bank has told the country’s third largest lender First Investment Bank (Fibank) to raise about 206 million levs ($117 million) in additional capital by April, following a health check on the Balkan country’s banks.
The central bank said on Thursday that the asset quality review (AQR) and stress tests showed none of Bulgaria’s 22 banks require state support and that the banking system as a whole is well capitalised and resilient to market shocks.
The health check was Bulgaria’s first since a banking crisis, triggered by the demise of its fourth largest lender Corporate Commercial Bank (Corpbank) two years ago.
It looked at whether Bulgarian banks had valued their assets properly in their 2015 annual reports and how they can withstand a hypothetical three-year economic shock.
The central bank said on Saturday the AQR showed banks need to make adjustments worth 665 million levs in the way they valued their assets and prompted the need for a capital build up at two smaller lenders as well.
Analysts and bankers welcomed the results of the tests and said that both the adjustments and the needed capital are almost negligible and would not impact the country’s economy.
“The results shows most of the banks did very well. The need of additional capital is very small and would not have any macroeconomic impact,” said Lachezar Bogadanov, an economic analyst with Sofia-based Industry Watch.
The checks on the quality of Fibank’s assets resulted in its CET 1 capital ratio dropping to 5.2 percent and when tested under a theoretical severe economic crisis this fell to -6.9 percent.
Bulgaria’s smaller Investbank also ended the test with -7.7 percent and the central bank has given it to April to raise 20 million levs in equity capital. Investbank said it would reduce its risk weighted assets by 134 million levs.
At the start of the test, Bulgaria’s 22 banks had an aggregated CET 1 ratio of 19.98 percent, that fell to 14.4 percent by the end of the test.
Fibank, with total assets of 8.5 billion levs ($4.85 billion), said it was already working on a plan to increase its capital buffers and a spokesman said it may happen sooner than April.
The bank was hit by a deposit run in 2014, days after the central bank took control over Corpbank, and earlier this year repaid 1.2 billion levs of state support it took to withstand the outflows. ($1 = 1.7513 leva) (Editing by Alexander Smith)
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