Bulgaria Policy Note : Financial Sector
This report describes developments in the banking sector. The banking sector has remained stable throughout the ongoing financial crisis, although profitability is declining. Indicators suggest that banks are generally sound. It next describes the...
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| Format: | Policy Note |
| Language: | English en_US |
| Published: |
Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2009/07/16797519/bulgaria-policy-note-financial-sector http://hdl.handle.net/10986/18894 |
| Summary: | This report describes developments in
the banking sector. The banking sector has remained stable
throughout the ongoing financial crisis, although
profitability is declining. Indicators suggest that banks
are generally sound. It next describes the state of funding
of bank operations, including wholesale bank funding. In
response to financial stress, The Bulgarian National
Bank's (BNB) actions have helped to ensure financial
stability in the banking sector. In order to boost
confidence, deposit insurance has increased. External
funding dynamics are generally good. Foreign currency
mismatches are substantial, and the corporate sector has
high direct foreign currency exposure, mostly in euros.
Short-term external debt (deposits and borrowings) of banks
almost doubled within a year in 2008, and account for close
to 80 percent of banks' external debt. Regarding recent
trends in credit to the enterprise sector, going forward,
demand for banking credit, and especially investment
finance, will fall, in line with the economic downturn. In
equity market developments, Bulgaria's stock market
plunged, with adverse consequences for pension funds. Global
deleveraging by foreign institutional investors led to a
withdrawal of their holdings from the Sofia stock exchange,
leading to a collapse of stock market prices. The report
concludes with several policy recommendations. |
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