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Apr 27, 2023 11:03 EEST
April 27 (SeeNews) - Bulgaria's central bank said that it decided to increase the mandatory reserve requirements for local banks, aiming to reduce the credit risk in the country's banking system.
Starting June 1, the minimum reserves on funds attracted by banks from non-residents will go up to 10% from 5%, whereas starting July 1 the minimum reserves on funds raised from both residents and non-residents will increase to 12% from 10%, the Bulgarian National Bank (BNB) said in a statement on Wednesday.
The decision to tighten lending conditions is dictated by the slow trickle effect into the Bulgarian banking system of the tightened monetary policy of the European Central Bank as well as the limited consequence of the increased countercyclical buffer rate on the lending activity in the country, the BNB said.
"The measure will withdraw some of the current excess liquidity in the banking system and contribute to reducing the free resources with which banks can lend, creating incentives for a faster and more significant transfer of the increased interest rates in the euro area to the cost of loans," the central bank noted. A decreased lending activity will also help gradually slow down inflation.
The spike in consumer prices, high salary increases in the private sector, strong consumer demand and the continued high growth of lending to households were some of the factors creating risks for the stability of the banking system in Bulgaria, the BNB said.
In the three months to end-December, the loans and advances in Bulgaria's banking system increased by 3.6% on the quarter to 92.7 billion levs ($52.4 billion/47.4 billion euro), taking up a share of 59.6% as of end-2022, BNB said in a quarterly overview of the banking system published earlier this week.
(1 euro = 1.95583 levs)
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