Bulgarian banks, including the units of Greek lenders, are well-capitalized and wouldn’t be affected by a default in neighboring Greece, said the central bank in Sofia.
Greece shut its banks and imposed capital controls last night. The measures “can’t in any way affect the normal functioning and stability of the Bulgarian bank system,” the Bulgarian National Bank said in an e-mailed statement on Monday.
In Bulgaria, the European Union’s poorest nation, 28 percent of banking assets are Greek-held, according to the central bank. With that ratio higher than in any other nation in the EU, Bulgarian President Rosen Plevneliev last month said the country is the 28-nation bloc’s most vulnerable to potential Greek spillover.
The yield on Bulgaria’s euro-denominated bond due in September 2024 rose 27 basis points to 3.185 percent, the highest in six days, at 1:39 p.m. in Sofia.
“I don’t see an immediate threat to Bulgarian banks or the Bulgarian economy,” Emil Asparouhov, head of treasury and capital markets at DSK Bank in Sofia, said by phone. “Bulgarian bonds will be affected.”
The Royal Bank of Scotland Group Plc on Monday cut its recommendation for Bulgarian and Romanian debt to underweight as the two countries have the “strongest exposure to Greece,” according to an e-mailed report.
United Bulgarian Bank is 99.9 percent owned by National Bank of Greece, while Athens-based Piraeus Bank SA, Eurobank Ergasias SA and Alpha Bank AE also have operations in the country.
Bulgaria’s public debt at 28 percent of gross domestic product “should be seen as a strong limit to default risks,” RBS said. The country has a fiscal buffer of 10 percent of GDP, which would help it deal with a Greek spillover, ICBC Standard Bank Plc in London said on June 22.
Bulgaria is facing the Greek fallout risk with leadership at the financial regulator in flux. Central bank Governor Ivan Iskrov last week submitted his resignation, ceding to pressure over his handling of Corporate Commercial Bank AD’s failure last year. Authorities in June 2014 rescued the nation’s third-largest lender and closed the fourth-largest bank, both locally owned, to stem a run on deposits.
Lawmakers will probably pick a new governor by July 10, when Iskrov leaves his post. Since 1997, the country has been under a currency board regime that curbs government spending and limits the central bank’s options to impose independent monetary policy, operating a lev-euro peg.