Countercyclical Capital Requirement in Bulgaria Remains at 2% Amid Strong Credit Growth

The Bulgarian National Bank (BNB) has confirmed that the countercyclical capital buffer for credit risk exposures in Bulgaria is set to remain at 2 percent in the first quarter of 2027. This decision, announced by the BNB Governing Council, aims to strengthen banks’ ability to absorb potential losses from macrofinancial shocks and to support the stability of the banking sector under pressure on profitability and capital positions.

The countercyclical buffer has been gradually raised over recent years: it increased to 1 percent in October 2022, to 1.5 percent in January 2023, and to 2 percent in October 2023. The measure is designed to help banks manage credit risk accumulation during periods of high credit growth.

Domestically, credit activity in the non-government sector remained strong in the third quarter of 2025, driven by robust private consumption and rising labor incomes. On the supply side, banks’ stable capital position and high liquidity, supported by the BNB’s consistent and conservative macroprudential policy, have been key. While high credit growth has supported short-term bank profitability, prolonged elevated lending contributes to higher borrower indebtedness and potential credit risk on banks’ balance sheets.

The external environment continues to present significant uncertainty. Disruptions in international trade or economic activity could affect supply chains, exports, consumption, and investment. Given Bulgaria’s high integration in global production and trade networks, such shocks could weaken borrowers’ solvency and increase non-performing loans.

The countercyclical capital buffer, established under BNB Regulation No. 8 in line with EU Directives 2013/36/EU and 2019/878, serves as a protective measure for the banking system against losses arising from cyclical systemic risk during periods of rapid credit expansion.