Financial Crime World

Banking Regulations 2022 in Bulgaria - A Year of Resilience Amid Challenges

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Despite a less pronounced economic slowdown than initially anticipated, Bulgaria’s banking sector continued to thrive in 2022. The sector’s performance was driven by robust export growth, wage and social transfer increases, and higher-than-expected economic expansion.

Key Performance Indicators

  • Total assets of the banking system increased by 14.8% to BGN 155.4 billion (EUR 79.5 billion) as of December 31st, 2022.
  • Net interest income rose by 17% on an annual basis to BGN 3.2 billion (EUR 1.65 billion).
  • Net fee and commission income grew by 15.2% to BGN 1.4 billion (EUR 731 million).

Regulatory Requirements

The banking sector’s resilience was evident in its ability to absorb the impact of regulatory requirements and changes. The Bulgarian National Bank (BNB) identified eight banks as other systemically important institutions (O-SIIs) and set buffer levels between 0.50% and 1%. Additionally, the counter-cyclical capital buffer will increase from 1% to 1.5% effective January 1st, 2023.

Euro Adoption Preparation

The sector’s performance was also influenced by preparation for Bulgaria’s euro adoption. The average interest rates on new deposits and loans continued a gradual upward trend, with the average interest rate on deposits with agreed maturity from households in BGN increasing by 23 basis points to 0.33%.

Financial Results

Despite these challenges, the banking sector’s financial result remained strong, driven by double-digit growth in loan portfolio volume across all business segments.

  • Return on Assets (ROA) increased to 1.4% from 1.1%.
  • Return on Equity (ROE) grew to 12.3% from 8.9%.

The sector’s net profit stood at BGN 2.079 billion (EUR 1.063 billion) as of December 31st, 2022, compared to BGN 1.416 billion (EUR 724 million) a year ago.

Conclusion

Bulgaria’s banking sector demonstrated remarkable resilience in the face of challenges, driven by robust economic growth and prudent risk management. As the country prepares for its euro adoption, the sector is well-positioned to continue supporting economic development and stability.