SOFIA, Bulgaria — Bulgaria's government is stepping in to guarantee 70% of the capital increase of a private bank, a move meant to facilitate the country's accession to the EU banking union and to start the two-year process that leads to joining the euro.
The government cleared the state-owned Bulgarian Development Bank to buy shares from the capital increase in First Investment Bank.
"Ensuring stability of this bank was the last requirement," Prime Minister Boyko Borissov said Friday about the accession requirements. Borissov's center-right government has said that Bulgaria wants to start the two-year euro entry process this July. Its hope is that a swift entry into the eurozone would guarantee Bulgaria's deeper integration in the EU.
The bank, country's fifth largest, is seeking to raise 200 million levs (102 million euros, or $110 million) in a 26.7% capital increase by issuing new shares.
The government argued that the state had to intervene because of low investor interest due to the coronavirus crisis. It said the intervention should not be considered state aid because 30% of the capital increase would be covered by private investors.
Borissov said the Bulgarian Development Bank would later sell back its stake with interest to avoid any losses to public funds. The state-owned bank was set up to support small enterprises and projects of national importance.