BNB FORBIDS CAPITAL RAISE THROUGH REAL ESTATES
The Bulgarian National Bank (BNB) put a ban on the raise of commercial banks' capital through the contribution of buildings and other real estates. The ban came after amendments to Regulation No2 on Licenses and Permissions were adopted by BNB's Managing Board on July 18, 2002. The amendments were published in Issue 76 of the Official Gazette dated August 6, 2002.Under the new provisions, the BNB is allowed to deny permission for raising the capital of a commercial bank through noncash installments, if these are assets of 50 or 100% risky weight as described by Regulation No8 on Capital Adequacy. The regulation stipulates that bank buildings are assets of 100% weight - regardless of whether or not they are used for branch offices of the bank.Sources familiar with the bank regulations claim that after the amendments to Regulation No2 become valid, banks will only raise their capital by cash payments or contribution of gold or government securities issued by the Bulgarian Government or by the 24 countries enlisted in Appendix No1 to Regulation No8.Before the license regulation was amended, banks were allowed to raise their capital by contributing buildings provided that they had collected their lowest capital required (BGN10MN) in cash installments. What is more curious is the fact that the amendments to Regulation No2 become valid on the day they are published and refer also to pending permission procedures.