Bulgaria, Romania 'Most Vulnerable to Grexit'

EFG Eurobank, Greece's second-largest lender, is owner of Bulgaria's Post Bank. Greek banks control about 30% of banks' total assets in Bulgaria and about a sixth in Romania and Serbia. Photo by BGNES

Bulgaria and Romania have direct exposure to Greece, which makes them most vulnerable among European emerging economies in the event of a Greek exit from the euro zone, according to the Wall Street Journal.

Greek banks hold nearly a 30% of the Bulgarian banking market, a 20% share of the bank loans and one-third of all deposits.

In Hungary, whose heavily indebted country is also considered especially at risk, Prime Minister Viktor Orban has called on Poland, the Czech Republic and Slovakia to join hands to prevent parent banks from siphoning funds from subsidiaries in the region and to seek access to European Central Bank foreign-currency swaps, the Wall Street Journal points out.

So far, however, the response from Hungary's neighbors has been unenthusiastic.

In Poland, where the economy is much healthier, the central bank governor, Marek Belka, said authorities are carefully monitoring the banking system and are prepared to supply liquidity--in euros and Polish zlotys--to shore up the financial system if needed.

"An intergovernmental initiative isn't the proper thing to do here," Belka told the Wall Street Journal. Such matters should be handled "between the ECB and national central banks."

"Of course, I would get worried if big European banks that happen to have subsidiaries here get in trouble," Belka said.

"But the subsidiaries are reasonably fenced off, supervised by us, well capitalized and liquid."

Poland's banking sector is about 70% foreign-owned.

In Bulgaria, some of the biggest lenders are managed by Italy's UniCredit, Greece's National Bank of Greece, Hungary's OTP and Austria's Raiffeisen.

Other Greek banks present in Bulgaria include EFG Eurobank, Piraeus, Emporiki and Alpha Bank.

Experts have warned that Bulgaria, the European Union member boasting one of the the bloc's smallest budget deficit, risks seeing its banks sucked under by the fiscal sins of neighboring Greece.

Bulgaria's central bank and finance minister however have repeatedly tried to assuage fears over funds outflow from Greek bank subsidiaries in the country to headquarters in Greece, saying this is part of the free movement of capital.

FULL text of WSJ article READ HERE

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