site.btaCentral Bank Governor: Bulgarian Banking System Stable

Central Bank Governor: Bulgarian Banking System Stable

Sofia, August 11 (BTA) - Bulgaria's banking system is stable, reads a statement by the Bulgarian National Bank's (BNB) Governor Dimitar Radev, issued on the occasion of the recently concluded asset quality review and stress test of the banks in Bulgaria. BNB's Governing Council adopted on Thursday the results of the asset quality review and stress test, as summarized by the international professional services company Deloitte.

The Governing Council has concluded that the results do not necessitate any public support to the banks with state budget funds.

The main indicator of a bankТs financial resilience, the ratio of bank common equity tier one capital to its risk-weighted assets, or the CET 1 ratio, remains significantly above the required minimum regulatory requirements on a system level and is above the EU average as announced in the latest European stress test. The CET1 ratio adjusted for the results of the asset quality review is 18.9 per cent on system-wide level compared to the minimum regulatory requirement of 4.5 per cent. The stress test indicated that if the latest 2018 macroeconomic forecasts materialize, the CET1 ratio would increase to 22.2 per cent. In the case of a severe economic crisis, which is very unlikely, the CET1 ratio would decline to 14.4 per cent. For the European banks, the results are significantly lower - 13.9 per cent and 9.4 per cent respectively. Therefore, banks' capital adequacy is strong and banks have the capacity to absorb shocks in unfavorable market conditions, Radev's statement reads, which BNB posted on its website.

The capital adequacy of each bank, after potential adjustments from the asset quality review, remains above the minimum regulatory requirements. Indeed, the individual results vary across banks. Follow-up plans have been developed in line with individual results and include measures aimed at maintaining existing capital buffers for some banks or increasing capital buffers and decreasing risk-weighted assets for others. The concrete follow-up measures and timeline for their implementation will be announced on Saturday, as part of the published results. Implementation of the measures will begin on Monday, August 15, 2016. They will be incorporated in the individual bank's capital management plans, as well as in the supervisory process conducted by the BNB.

The main objective of the review was to present a thorough and independent assessment of the banks and the banking system as a whole. In its scale the exercise was unprecedented in the Bulgarian banking history and engaged over 900 experts, including experts from the most reputable international audit firms, which acted under the direction of the BNB.

Radev has presented the results to Finance Minister Vladislav Goranov and will submit them in Parliament on Monday. The detailed results for the whole banking system and each separate bank will be announced on Saturday.

Finance Minister Goranov commented the stress test results by saying that the fiscal buffer, which the Government had set aside as a potential guarantee for the banking system's stability, will be used to pay maturing debts, and that in turn eliminates the need to re-finance them with new debts.

Goranov voiced his belief that the same high-level of professionalism will be used during the asset quality review of pension funds and insurance companies.