A Bulgarian member of the European Parliament has tried to assuage fears over a possible bank drain in the subsidiaries in the Eastern European country following the new rules on bank recapitalisation.
"This is necessary in order to create a protective fire wall for the banks and to avoid contagion. Bulgaria already has stricter requirements for capital adequacy, which gives additional reasons for investors to trust Bulgarian banking system and the economy," Andrey Kovatchev, member of the European Parliament from Bulgaria's ruling party GERB and chairman of the Bulgarian delegation in the European Peoples Party EPP group, said in an exclusive interview for Novinite.com.
According to Kovatchev it is important that banks raise enough capital and increase their capacity to resist financial instability while at the same time do not shrink their portfolios and lending.
The requirement for 9% capital adequacy is part of the latest package of measures agreed at the European Council on October 26.
The new rules on bank recapitalization triggered fears of a bank drain in the subsidiaries in Eastern Europe, including Bulgaria.
Under the "three-pronged" deal to fix the eurozone's debt crisis, which was clinched after marathon talks in Brussels, European banks will be required to raise about EUR 106 B in new capital by June 2012.
It is hoped that this would help shield them against losses resulting from any government defaults and protect larger economies - like Italy and Spain - from the market turmoil.
The majority of Bulgaria's banking assets are in the hands of eurozone member states. (Source: Sofia News Agency)