Bulgarian c-bank raises countercyclical capital buffer rate to 1% as of Oct 2022

Bulgarian c-bank raises countercyclical capital buffer rate to 1% as of Oct 2022

Bulgaria's central bank said that it has set the countercyclical capital buffer rate applicable to credit risk exposures in the country at 1.0%, to be in effect as of October 1, 2022

The countercyclical capital buffer rate, applicable to credit risk exposures in Bulgaria, remains at 0.5% until the end of the third quarter of 2022, the central bank said in a statement on Thursday.

The increase of the countercyclical buffer rate is aimed at strengthening the resilience of the banking sector to pressures on profitability and capital position, caused by higher volumes of non-performing loans and impairments.

According to the central bank, lending activity has been expanding at elevated rates, in particular in the segment of loans for house purchase. Currently observed credit growth rates may give rise to higher indebtedness and accumulation of cyclical risks, which may lead to an increase in the volume of non-performing loans in the event of future economic downturn.

"With regard to data related to the reference indicator for the countercyclical buffer, the credit-to-GDP ratio calculated according to the methodology published on the BNB website, stood at 97.6% at the end of the second quarter of 2021. Its deviation from the long-term trend is negative (-30.4 pp), which corresponds to zero value of the reference indicator," the BNB said.

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