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Dec. 6 (Bloomberg) -- Bulgaria’s increasing bad loans are covered by high provisions and capital and the bank system is “performing well” amid faltering economic recovery, central bank Governor Ivan Iskrov said.
Bulgaria’s banking system generates profit, which provides “additional capital buffers,” Iskrov said in a speech in Sofia today. Loans more than 90 days past due rose to around 14 percent of total lending at the end of September, he said. The capital adequacy ratio of the banking system is 18 percent and the liquidity ratio is 26 percent, while deposits increased 13 percent in year in October, he said.
“With these indicators Bulgaria’s banks are among the few in the European Union that didn’t have to be bailed out with taxpayers’ money,” Iskrov said. “The central bank’s conservative supervision policy encouraged banks to accumulate adequate capital and liquidity buffers. The bank system is performing well.”
Bulgaria, the EU’s poorest country in terms of economic output per capita, weathered the global crisis without borrowing from international lenders. The country aims to narrow next year’s budget gap to 1.35 percent of gross domestic product from 2 percent this year, in an effort to contain the impact from the euro area’s sovereign debt crisis.
Bulgaria’s credit demand will decline next year as economic recovery slows, Iskrov said. The EU cut Bulgaria’s 2012 economic growth forecast to 2.3 percent from 3.6 percent, while the government calculated next year’s budget on a 1 percent growth assumption to compensate for declining exports to the EU. The economy expanded 1.6 percent in the third quarter from a year earlier, the statistics office said today.
EU-based lenders control 85 percent of banking assets in the Balkan nation. The five biggest banks are UniCredit Bulbank; DSK Bank, a unit of OTP Bank Nyrt., Hungary’s largest bank; United Bulgarian Bank, owned by National Bank of Greece SA; Raiffeisenbank Bulgaria and Eurobank EFG Bulgaria.
The market share of Bulgarian-based banks may continue increasing next year as foreign lenders restructure their ownership in the region, Iskrov said.
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