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UPDATE 2-Bulgarian banks healthy for now, finmin says
January 30, 2009 / 10:29 AM / in 9 years

UPDATE 2-Bulgarian banks healthy for now, finmin says

(Updates with budget, growth comment)

By Irina Ivanova

SOFIA, Jan 30 (Reuters) - Bulgaria’s banks have not asked for state rescue aid so far and the government is not worried about the banking system’s health for now, Finance Minister Plamen Oresharski said on Friday.

Most of Bulgaria’s big banks, just like elsewhere in central and eastern Europe, are owned by Italian, Austrian and Greek lenders which are now faced with a sharp economic downturn in the region and tight global liquidity.

Austria appealed earlier this week to other European Union members to weigh in on an initiative aimed at bolstering the region’s banking sector due to global financial woes.

“None of the Bulgarian banks have asked for help,” Oresharski told a news conference. “We have regular meetings at the central bank...we do not have concerns at this stage.”

About 80 percent of the 29 commercial banks operating in Bulgaria are foreign-owned, with the biggest lenders run by Italy’s UniCredit (CRDI.MI), Hungary’s OTP Bank OTPB.BU, Greece’s National Bank of Greece (NBGr.AT) and Austria’s Raiffeisen RIBH.VI.

A source close to UniCredit said on Thursday the bank was considering asking for government aid in Italy and Poland. The bank said it may ask for aid in Austria.

Bulgaria’s banks have so far gone though the crisis relatively unaffected as they had followed conservative policies, despite a credit boom in the past few years.

They have significantly curtailed lending since October, following the tighter global liquidity and economic downturn, which analysts say may lead to a hard landing for Bulgaria and force the county seek help from the IMF or the EU.


Oresharski said Bulgaria’s tight fiscal policy and buffers envisaged in the government’s 2009 budget would help the economy escape a recession.

“We will do everything possible to prevent (a hard landing),” he said. “We are not going to revise the 2009 budget. That is why we have planned buffers in times of higher uncertainty and a global crisis.”

Bulgaria runs one of the tightest fiscal policies in the EU and ended 2008 with a preliminary budget surplus of 3 percent of GDP. [ID:nLU732118]

The government plans to produce the same fiscal windfall this year but might cut it to 2.0 percent of GDP to boost public spending and help businesses if the situation worsened. Sofia says it can also rely on its hefty fiscal and forex reserves.

Oresharski have repeatedly said Bulgaria does not need help from the IMF for now. He said on Friday Sofia was monitoring the economic situation in close cooperation with the EU.

“We are to hold more serious talks in this direction -- not in the direction of an (aid) agreement, but in the direction of informing Brussels in details about our macroeconomic development,” the minister said.

The IMF has already provided rescue packages to Iceland, Hungary, Ukraine, Latvia and Serbia and some analysts say other Baltic countries, as well as Romania and Bulgaria, may be the next in line. Romania has already started talks with the EU on a potential rescue loan.

Economists have warned Bulgaria’s huge current account deficit heightens its vulnerability to external shocks as foreign investors flee the country to safer grounds and its key export market - the EU - plunges into recession. (Writing by Anna Mudeva; Editing by Andy Bruce)

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