Bulgaria’s changes to time limit for recovering debt to weigh on economy - EBRD

Bulgaria’s changes to time limit for recovering debt to weigh on economy - EBRD

The European Bank for Reconstruction and Development (EBRD) said on Wednesday that it is concerned about proposed changes to the time limit for recovering debt in Bulgaria, as they will have a negative effect on the country's economy.  "If passed and implemented in current form, the new amendments will have a significant negative impact on the Bulgarian financial sector and, subsequently, the real economy," the EBRD said in a statement.  The proposed changes to Bulgaria's civil law set an absolute ten-year limitation for all debt claims against consumers. The changes will apply also to consumers for whom the creditors obtained a legal title or started legal proceedings.  According to the EBRD, the amendments will also affect debt collection rates and the operations of asset management companies in charge of distressed assets. This is likely to damage an entire industry tackling the issue of non-performing loans and helping to free up banks’ resources, enabling them to keep lending, the EBRD added. The EBRD also expects the proposed changes to negatively affect bank operations, as consumers struggling with debt will have little or no incentive to pay off loans. As a result, banks might lower their appetite for lending to sectors traditionally seen as more risky such as women-led businesses, start-ups, agriculture and companies based in rural communities, all of which are key to the development of a sustainable and inclusive economy, the EBRD noted. "The EBRD welcomes the opinions presented by the Bulgarian Ministry of Finance and the Ministry of Justice and urges the Bulgarian legislators to hold a dialogue with all stakeholders, including banks and non-bank financial institutions as well as investors, to reach a solution, which is supported by the sector as a whole," the financial institution also said.

 

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