S&P: Bank Turbulence Will Not Affect Bulgaria's Debt Rating

S&P: Bank Turbulence Will Not Affect Bulgaria's Debt Rating

Developments in Bulgaria's banking sector will not affect sovereign debt rating of the country, agency Standard & Poor's (S&P) says.

The announcement comes after S&P decided to cut the credit rating of Bulgaria by one notch lowering it to BBB- in mid-June, citing lack of progress on reforms which it considered likely to hinder economic growth.

The agency underscored authorities' efforts to curb the spillover effect of problems at the First Investment Bank (FIBank) and Corporate Commercial Bank (KTB) to other institutions or to the wider region, including the decision to set aside a BGN 3.3 B (EUR 1.65 B) liquidity support scheme to prevent further damage.

As a result the situation is stabilizing, S&P is quoted by website Investor.bg.

The fast-paced withdrawal of capitals from FIBank and KTB, however, reflects "weak institutional efficiency and bad management" underpinning the agency's earlier decision to slash the rating of Bulgaria, in S&P's view.

Forecasts by S&P resembled those issued earlier at another agency, Fitch, which said the state and shareholders could inject capitals into KTB if they were needed.

In June, two of Bulgaria's largest banks were hit by a wave of rumors which raised panic among many who had assets there and pushed them to withdraw their savings.