SOFIA, Oct. 30 (Xinhua) -- The Bulgarian bank system has the best capitalization in the entire European Union (EU), Bulgarian National Bank (BNB) Manager Ivan Iskrov said Thursday, according to local media reports.

    Iskrov made the statement before members of the Greek Business Council while discussing impacts of the global financial crisis onBulgaria.

    Bulgarian banks are in a very good financial condition, said Iskrov. With their capitalization of 125 percent, they should be able to withstand possible difficulties, if any, in the repayment of loans in the construction sector.

    Iskrov gave the assurance that talks had been held with all commercial banks in Bulgaria so that their profit for 2008 is capitalized instead of transferred to parent institutions abroad.

    According to data from BNB until September 2008, credit institutions operating in the country have registered profits of 1.1 billion leva (about 730 million U.S. dollars), which is 30 percent more compared to the same period of 2007. Profits are projected to reach 1.5 billion leva (about one billion U.S. dollars) by the end of the year.

    Referring to the recapitalization taking place in Western Europe, Iskrov said that there was no need to recapitalize banks in Bulgaria as they were over-capitalized.

    The global financial crisis is not affecting the country's banking system, but real business, Iskrov explained.

    He predicted that in the event of a long-drawn crisis, Bulgaria could expect deflation, increased unemployment and low rate of salary increase.

    Iskrov also cited Bulgaria's membership of the International Monetary Fund (IMF) as a major safeguard against financial difficulties.