Central Bank Head: Bulgaria Banking System Sound despite Crisis

Bulgaria’s banking system is stable and has good indicators, according to Bulgarian National Bank Governor, Ivan Iskrov.

During the Fourth Annual Meeting of Government and Business in Sofia Tuesday, Iskrov said the banking system in the country had high capital adequacy, and continued to be profitable.

He cited data showing that in the first nine months of 2009, the Bulgarian banks made a combined profit of BGN 622 M, which was a good result even though it is 40% less than in the same period of 2008. The non-performing credits have risen to 5,6%, and the credit growth is 4,46% in the third quarter of 2009 year-on-year.

According to the BNB, the Bulgarian economy may start growing in the second half of 2010, reaching a growth of up to 0,5%; the pessimistic forecast is for a 0,2 decline in 2010.

Iskrov said there were not going to be any modifications in the way currency peg policies were being conducted in Bulgaria, and said he had understanding with the government on striving for fiscal discipline and a balanced budget.

“We saw that the pegged currency exchange rate in Bulgaria not only did not hurt the economy but actually helped it,” the BNB Governor said. He stressed the Central Bank’s role in limiting credit risks and accruing fiscal buffers. “We have obliged banks to reinvest all of their profits. We had serious talks with the foreign owners and they agreed to support their Bulgarian subsidiaries,” he added.

Iskrov refused to make any further comments on the information that he and former Finance Minister Plamen Oresharski made a secret deal for depositing part of Bulgaria’s fiscal reserve into commercial banks in May 2008.

“The Prime Minister requested that no random people should talk on that matter. And I don’t need the mediation of the media in order to talk to the Prime Minister. He explicitly asked me and the Finance Minister Djankov not to comment on that any more,” Iskrov said regarding the information announced by Djankov Friday that about BGN 1 B from the fiscal reserve were deposited in 17 commercial banks.

Friday’s reply of the BNB was that the banks in question were used for current transactions, and that the “secret deal” with the former Minister was a preparation for a bailout package in case of a banking crisis.