The Bulgarian Development Bank (BDB) will grant credit lines for up to EUR 10 million to domestic trade banks. The scope of this initiative is to stimulate availability for funding of Small and Medium Enterprises within the country.
Those are purpose credit lines for medium and short term investment needs, financing of invoiced exports and projects under the EU Structural Funds criteria. The loans will be granted for a maximum term of 10 years and a grace period for up to 5 years.
Through the available credit lines the trade banks will be able to provide loans to Small and Medium Enterprises amounting to no more than EUR 1 million with a maximum interest charged comprised of the six month EURIBOR rate + 4 basis points. All usual instruments accepted as collateral and required share of own participation within our banking system remain applicable to those loans as well.
The refinancing of trade banks is a result of the accepted by the government package of measures for “Market Flexibility” aiming at minimizing the negative effects on the Bulgarian economy from the financial crisis. Some of these measures include a BGN 500 million staged capitalization of the Bulgarian Development Bank. The made available funding is directed towards refinancing of the trade banks and thus easing the Small and Medium Enterprise’s access to financing. The first BGN 100 million of the increase in the bank’s capital is expected in the beginning of December this year.
There are 17 trade banks which have already expressed their interest in obtaining a credit line from BDB. The resources available from the first tranche will be distributed depending on the ranking of the trade banks with regards to fulfillment of different criteria – CAMEL /BNB ranking which it gives to the trade banks during it’s regular supervision/, size of the corporate loan portfolio, capital adequacy, type and value of the proposed collateral. These criteria are coordinated with the Association of Bulgarian Banks.
Additional requirements towards banks have also been imposed by the BDB. One of the conditions states that the obtained by this credit line funds are not to be used to refinance loans which are serviced within the bank group or to reduce the net amount of the attracted from the bank’s majority shareholder and/or it’s affiliates funds for more than one month. In order to ensure that this condition is fulfilled the BDB requests to obtain a letter from the owner of the financial institution enclosing a statement for it’s intensions. Another requirement to be fulfilled by the banks is to follow the BNB’s advice with regards to 2008 dividend capitalization as well as to revolve effective loans if there is no founded reason for cancellation. The set conditions guarantee the purposeful use of the made available by the credit lines resources.
The BDB is the Encouragement Bank’s legal successor. It provides long term investment loans and directly or indirectly finances invoiced exports for Bulgarian Micro, Small and Medium enterprises. BDB has a significant experience in attracting and the actual management of foreign credit lines – the German development bank Kreditanstalt für Wiederaufbau, the European Investment Bank, the Development Bank under the Council of Europe, the Nordic Investment Bank, Dexia Kommunalkredit Bank, DEPFA Bank, Japan Bank for International Cooperation and so on.
