The Bulgarian National Bank foresees an Accelerated Increase in Interest Rates

Finance | April 25, 2023, Tuesday // 17:33|  views

The process of raising interest rates in Bulgaria will accelerate in the coming months, the BNB predicts in the traditional publication "Banks in Bulgaria". The Central Bank warns that there are prerequisites for the accumulation of risk in the balance sheet of the banking system.

The banking sector operates in conditions of high inflation and considerable uncertainty, writes the analysis of the "Banking Supervision" department of the BNB for the last quarter of last year.

"Short-term risks in the economic environment were mitigated by the observed weakening of difficulties in supply chains, as well as by the dynamics of energy prices on international markets, which decreased compared to the levels reached in the previous months," the BNB commented.

From there, they predict that the global process of rising interest rates will be felt more seriously in our country in the coming months.

"Although in the immediate term the rapid growth of credit volumes has a positive effect on the profitability of the banking sector, prolonged periods of high credit growth create prerequisites for an increase in indebtedness and accumulation of credit risk in the balance sheet of the banking system."

This may lead to a deterioration of the banks' credit portfolio. They are generally very liquid and well-capitalized.

"Regardless of this, credit institutions should manage their liquidity in accordance with the high degree of uncertainty and the probability of changes in the volume and structure of deposits, caused by unfavorable changes in the financial situation of enterprises and households," the BNB also wrote.

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Tags: BNB, interest rates, bank, Bulgarian


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