The debt crisis problems in Europe convinced even the biggest skeptics that the Bulgarians bankers had been right. Those had tried to prove for months that this country’s bank system is a stable one in these times of financial crisis and the sector could face no dangers. However, a new problem appears now for Bulgarian banks and other Central and East European countries – how to protect themselves from the contamination, coming from the mother-banks to their branches in the region. Since big European banks should reach a capital liquidity of 9 percent by end-June 2012 /the ratio between their own capital and credits given/. This means they need additional EUR 115 bln. that have to be somehow collected. International bank experts and finance analysts foresee that the raising of additional capital may happen at the expense of their subsidiaries in Central and East European countries. In their words Hungary is the most threatened state, but Bulgaria, Romania and Serbia are also mentioned, since they are exposed to the greatest financial risk due to the Greek crisis.
However, Bulgarian banks attacked the market and gathered a huge capital in deposits as early as the beginning of the crisis. Thus they reduced significantly the need of external funding. On the other hand the crisis also caused a shrinking of credits due to the business’ unwillingness to have new debts and the strict requirements of banks. So the capital accumulated remained unabsorbed, i.e. a lot of extra money exists. It looks like there is a certain danger, since “coordinated actions” were discussed in Europe, in order for the quick withdrawal of huge funds from CE countries’ bank sectors to be avoided. This would lead to weakening of banks and a crisis in crediting. Some information appeared in the public space that western banks might withdraw EUR 1.4 bln. from their branches in Bulgaria.
“The sale of fear is a financial business, it scares customers and raises the interests’ prices. I do not trust those independent researches of the West, since everyone in this sector has own interests and goals,” famous finance expert Emil Harsev said in an interview for Radio Bulgaria.
“There are countries in this part of the continent with drastically different economic systems,” the expert explains. “For instance, the Bulgarian and Romanian ones. These are neighboring countries, but one of them has a currency board and balanced budget, while the other is with a floating rate, serious indebtedness of the bank sector etc. There are huge differences between both states. The other issue that obviously interferes this dark forecast is that this money, invested by western banks in their eastern subsidiaries are in account receivables that are with an average maturity of more than 5 years. I.e. they will have to wait for five years and then collect them. This means that the forecast cannot become reality till 2012. There is a liquidity too, maintained according to the requirements of the Bulgarian legislation. The Central Bank will shut down anyone, who tries to export that liquidity in precisely 24 hours. It is “politically correct” to say that the situation in East Europe is bad and good in the western parts. These are simply clichés, prejudices.”
Some experts claim that Bulgarian banks may be forced to reduce their capital liquidity from 15 to 9 percent.
“This is not possible, since higher requirements are set for this country on purpose, due to several reasons,” Emil Harsev goes on to say. “The major one is the currency board, implemented in 1997. There is no such thing in any West European country. Another thing: Bulgarian banks have no access to re-funding. The European Central Bank gives no money to them, when they ask. That was why the Central Bank of Bulgaria raised the capital liquidity for this country a long time before it occurred to the Council of Europe, regarding European banks. This was necessary and continues to be mandatory. Those banks may differ in terms of nationality and ownership, but their licenses and territoriality are Bulgarian and they respond to this country’s requirements. These are twice stricter than the European ones due to the currency board.”
English version: Zhivko Stanchev
