Bulgarian central bank plans to further ease the reserve requirement to 5% as of January 1, reaching the lowest level of minimal compulsory reserves since the introduction of the currency board arrangement, said central bank governor Ivan Iskrov.

Iskrov added that the minimal compulsory reserves will not be imposed on the money attracted by banks from municipalities and the central government.

Central bank has already cut the reserve requirement to 10% from 12% in a bid to untie some BGN 1.1 billion of attracted resources given the current level. The decision took effect on December 1.

The amendment is brought about as a result of the accomplishment of the targeted aim of last year's increase in MRR from 8% to 12%, namely the cooling down of the loan portfolio expansion, has stated central bank.

Meanwhile, Iskrov stated that local banks' profit is seen at BGN 1.5 billion in 2008, up by 30% on the year. Moreover, he asked local banks' not to capitalize their 2008 profit and not to disburse dividend.

Iskrov also said that the central bank may also raise the share of Tier 1 capital to a bottom 10%.