The ECB Checks Whether Banks in Bulgaria Can Cope with External Risks
The ECB's assessment of six major banks working in the country has to show whether they can resist external as well as internal risks. Stress tests are already running and are due to the demand for Bulgaria to enter the Eurozone waiting room (ERM II mechanism) and the Banking Union, the 24-hour newspaper writes.
The tests simulate situations where the eurozone GDP dropped by 2.4%, property prices dropped by 17% and shares fell by 31%. Results are expected in July.
Internal risk testing is based on three main lines: a sharp reversal of the business cycle and a decline in GDP of over 3%, a rise in global bond yields and a liquidity risk.
What can be expected - probably the level of own capital will be enough, the question is what will be the share of bad loans, as well as to related parties. It is precisely because of these indicators that there are definite recommendations to maintain a higher capital buffer. Some banks may be advised to reduce risk exposures.
The selection of banks subjected to stress tests was done by the ECB. These are the first three by assets - Unicredit Bulbank, DSK and UBB, as well as the three largest Bulgarian companies - First Investment Bank (Fibank), Central Cooperative Bank (CCB), Investbank.
The ECB has a large number of instruments in the event of a severe economic downturn. This is stated by the BNB Governor Dimitar Radev before the Financial Market News. So he commented on the forecast for reversing the economic cycle towards the recession.
He also sees grounds for worrying about very low or negative interest rates, especially if they remain at these levels for a long time, and calls for an adequate assessment of this danger. The challenges ahead are structural, not fiscal or monetary, Radev says about Bulgaria's readiness for the Banking Union and for the euro, writes Econ.bg