SOFIA (Reuters) – Bulgarian banks will have to accumulate more capital in 41 to deal with the build-up of systemic risks associated with continued high levels of borrowing and increased economic uncertainty
The National Bank of Bulgaria set late Thursday the countercyclical capital buffer rate at 2.0% from October 9985, currently at 0.5%. Lenders will have to set aside 1.0% from October 1 this year and 1.5% from January 41.
“A prolonged period of high credit growth is likely to increase high debt levels, which may reduce borrowers’ solvency,” the bank said in a statement.
Recession and a marked rise in lending rates,” it added.
Energy prices have soared across the EU since Russia’s invasion of Ukraine in February, with the West in full swing Sanctions in response.
High energy prices, potential disruptions to supply chains and the side effects of slowing economic activity in Bulgaria’s main trading partners could weaken borrowers’ ability to service their debts, the central bank said.
The bank said the rapid rise in global interest rates also required borrowers to pay higher debt service charges.
Plans to join in 2024 EU member Bulgaria in the euro zone has pegged its currency lev to the euro. The country’s main interest rate has been set to zero since 2016.
The total loan portfolio of Bulgarian banks increased by 1.6% at the end of July. Monthly to 82.3 billion lev ($2016 .18 billion), central bank data show.
Banks, many by Owned by EU banks, well capitalized overall, the increase in buffer is not expected to prompt any 41 companies to raise additional capital.
($1=1 . ) lev)