Prepared by Mark De Broeck and Yuri Kawakami.
Although the insolvent banks ceased operations in 1996, it took until March 1998 before all closed banks were declared bankrupt.
Stephan Barisitz, “The Development of the Romanian and Bulgarian Banking Sectors since 1990,” Focus on Transition, 1/2001, pp. 79–118.
However, in some banks, direct shareholders are established in off-shore centers, and no further information is available on the ultimate indirect shareholders or beneficial owners.
The privatization of DSK Bank (the former State Savings Bank) is being prepared.
For a more detailed discussion with a historical perspective, see Jeffrey Miller and Stefan Petranov, “The Financial System in the Bulgarian Economy,” Bulgarian National Bank Discussion Paper DP/19/2001, December 2001.
For an analysis of the factors impeding the expansion of lending to the private sector, see Tarhan Feyzioğlu and Gaston Gelos, “Why is Private Sector Credit so Low in Bulgaria?” IMF Staff Country Report 00/54, April 2000 (Washington: International Monetary Fund).
The actual maturity is longer as 70–75 percent of deposits are stable.
The decline in the share of time and savings deposits in the wake of the crisis has been driven mainly by the weakening of household confidence in the banking sector. This lack of confidence is also reflected in the fact that in 2000 only 27 percent of Bulgarian households had bank accounts, 10 percent time deposit accounts and 11 percent saving deposit accounts, respectively; see Jeffrey Miller and Stefan Petranov, o.c.
While the BNB collects detailed information on the foreign currency structure of assets and liabilities, it has yet to collect information on the foreign currency structure of deposits and loans by the type of currencies. New reporting forms with each balance sheet item and each income and expense item presented by foreign currency, including the type of currency, have been developed and are expected to be used from 2003.
While around half of all bank loans to private enterprises are expressed in foreign exchange, only a very small fraction of loans to households is (4 percent in March 2002).
John P. Bonin, “Financial Intermediation in Southeast Europe: Banking on the Balkans,” October 2001 (Vienna: Vienna Institute for International Economic Studies).
These three banks are Bulbank, the former State Foreign Trade Bank, United Bulgarian Bank, and DSK Bank, the former State Savings Bank.
The capital adequacy regulation issued on July 15, 1997 established a risked-based measure of required minimum capital in line with the Basle Committee recommendations. The minimum CAR was gradually phased in to reach 12 percent by end-1999.
As discussed below, the CARs are boosted by the high proportion of zero percent risk-weighted assets such as government securities and low risk-weighted assets such as placements with banks abroad.
The Banking Supervision Department categorizes banks into five groups according to asset totals: Group 1: > BGN 800 million (3 banks); Group 2: > 300, <800 million (6 banks); Group 3: > 100, <300 million (6 banks); Group 4: < 100 million (12 banks); Group 5: all branches of foreign banks.
Branches and subsidiaries of foreign banks have a much lower liquidity ratio than other banks, as they are normally able to liquidate deposits placed in their head offices and parent banks, in case of need.
Marketable assets include cash, noninterest-bearing deposits, interest-bearing deposits with banks, and Bulgarian treasury bills and bonds, minus all interest-bearing deposits with banks classified as watch or worse and all assets pledged to third parties.
It also excludes the new bank which started to operate in October 2001.
Exchange rate shocks were applied to net open foreign exchange positions other than Euro positions.
Indirect exchange rate risks resulting from lending in foreign exchange to non-foreign exchange earners are not covered by the stress tests on exchange rate risks but by those on credit risks.
While the repricing gap model provides information on the maturity mismatches in the portfolio by estimating the effect of an interest rate change on the income position, it does not assume any effect of the changes in the market value of assets, thus effectively valuing assets and liabilities at book value.
This number (23 percent) is provided by Bankscope, which covers only 20 banks with a relatively high exposure in deposits in foreign banks.
Banks in Bulgaria have the highest capital adequacy among the comparator CEE countries. The ratio of equity in percent of total assets was 20 percent in 2000 in Bulgaria, followed by those in Romania (18 percent), Slovenia and Poland (10–11 percent), and the Czech Republic, Slovak Republic, and Hungary (6–8 percent).
A straightforward comparison of nonperforming loan ratio, could be misleading, owing to different definitions across countries.