The Governing Council of BNB has set the level of the countercyclical capital buffer (CCyB) applicable to credit risk exposures in the Republic of Bulgaria to 1.5%, for the first quarter of 2021. The level of the countercyclical buffer applicable to credit risk exposures in the Republic of Bulgaria remains 0.5% until the end of the first quarter of 2020 and 1% from April to December 2020. However, the decision on the level applicable in the second quarter of 2021 is due in March 2020.
Lending activity in the housing and consumer loans segment in Bulgaria remains high. The continued retention of low interest rates could lead to a significant increase in debt, which would make the banking sector's asset quality, profitability, and capital position more sensitive in the event of any adverse changes in the economic environment. Given that ability of borrowers to service debt can weaken in the eventual future decline in economic activity, this increase in the CCyB level is intended to enhance resilience of the banking sector to such developments.
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Keywords: Europe, Bulgaria, Banking, CCyB, Credit Risk, Basel III, Regulatory Capital, BNB
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