bulgarian national bank bulgarian national bank third annual international finance conference...

BULGARIAN NATIONAL BANK

www.bnbank.org


www.bnbank.org

THIRD ANNUAL INTERNATIONAL FINANCE CONFERENCEFINANCE AND BANKING MODERNISATION IN CENTRAL AND SOUTH EAST EUROPE

Hilton Hotel, Sofia, Bulgaria30-31 January 2006



by

Tsvetan Manchev

Deputy Governor

Bulgarian National Bank

Bulgarian Banking Towards EU

Bulgarian Banking Towards EU

BULGARIAN NATIONAL BANKBULGARIAN NATIONAL BANK



SUMMARY

Sustainable economic development - key factor for the sound banking system;

The Bulgarian Banking Sector on the eve of the EU membership – the role of structural reforms;

Major challenges for Bulgarian Banking System on its way to membership in the Eurozone;


www.bnbank.org


www.bnbank.org





CURRENT ECONOMIC DEVELOPMENT




4.6%

0%

1%

2%

3%

4%

5%

6%

1998 1999 2000 2001 2002 2003 2004 2005e 2006f

Average 98 - 06

GDP REAL GROWTHGDP REAL GROWTH

Source: NSI, IMFSource: NSI, IMF




7.8

-1

1

3

5

7

9

11

13

15

1998 1999 2000 2001 2002 2003 2004 2005 2006f

%

Average 98 - 06

CPI

(annual average)

CPI

(annual average)

Source: NSI, IMFSource: NSI, IMF

25.125.1




0

5

10

15

%

Euro-zone long-term bond rates Treasury bonds (BGN)

Time deposits (BGN) Long-term credits (BGN)

INTEREST RATES CONVERGENCE

(annual average values)

INTEREST RATES CONVERGENCE

(annual average values)

Source: BNB, EurostatSource: BNB, Eurostat




0

100

200

300

400

500

600

700

800

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006f

in t

ho

us

an

d

0

5

10

15

20

25

%

Number of unempoyed Unemployment rate (end of period)

UEMPLOYMENT RATEUEMPLOYMENT RATE

Source: National Employment Agency, BNB

Source: National Employment Agency, BNB




-1.5

1.1

-1 -1 -0.8 -0.7

0

1.72.2

3

-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.5

1997 1998 1999 2000 2001 2002 2003 2004 2005e 2006f

Source: MoF, IMFSource: MoF, IMF

GENERAL GOVERNMENT BUDGET BALANCE

(% GDP)

GENERAL GOVERNMENT BUDGET BALANCE

(% GDP)

(+) surplus (-) deficit(+) surplus (-) deficit




83.1 86.777.1

69.9

56.248.2

40.932.4 28.6

0102030405060708090

100

1998 1999 2000 2001 2002 2003 2004 2005e 2006f

Source: MoF, IMFSource: MoF, IMF

GOVERNMENT DEBT

(% GDP)

GOVERNMENT DEBT

(% GDP)




MAASTRICHT CRITERIA FOR NOMINAL

CONVERGENCE

MAASTRICHT CRITERIA FOR NOMINAL

CONVERGENCE

INFLATION

0

2

4

6

8

2002 2003 2004 2005e%

Bulgaria New member states Reference value

Source: NSI, EC

LONG-TERM INTEREST RATES

012345678

2002 2003 2004 2005e

%


Source: BNB, ECB

BUDGET SURPLUS (+) OR DEFICIT (-)(% OF GDP)

-6

-4

-2

0

2

4

2002 2003 2004 2005e%

Bulgaria New member states Reference valueSource: NSI, MoF, EC

GOVERNMENT DEBT (% OF GDP)

010203040506070

2002 2003 2004 2005e

%


Source: NSI, MoF, EC


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www.bnbank.org





BANKING SECTOR REFORM




Local Private Banks, 23.60%

State-owned and Municipal Banks,

1.86%

Foreign Banks, 74.54%

PREDOMINANT FOREIGN CONTROL ON BANK ASSETS AND CAPITAL

(as of 30 September 2005)

PREDOMINANT FOREIGN CONTROL ON BANK ASSETS AND CAPITAL

(as of 30 September 2005)

Source: BNBSource: BNB




Source: BNB, FSC, BSE

Source: BNB, FSC, BSE

01020304050607080

%

Total bank assets (% GDP)Pension fund assets (% GDP)Insurance premiums (% GDP)Stock market capitalization (% GDP)

BANKS DOMINATE FINANCIAL MARKETSBANKS DOMINATE FINANCIAL MARKETS

*Preliminary data*Preliminary data




0

10

20

30

40

50

60

%

INCREASING COMPETITION(THE SHARE OF THE FIRST FOUR BANKS IN TOTAL BANK ASSETS AS OF THE END OF THE YEAR)

INCREASING COMPETITION(THE SHARE OF THE FIRST FOUR BANKS IN TOTAL BANK ASSETS AS OF THE END OF THE YEAR)

Source: BNBSource: BNB




HIGH GROWTH AND SOUND QUALITYHIGH GROWTH AND SOUND QUALITY

Bank assets are growing

very rapidly

Strongly capitalized

High liquidity is

maintained

Asset quality remains

very good

7.0

2.4

6.9

2.0

6.5

1.8

7.6

2.2

8.0

2.3

Q32004

Q42004

Q12005

Q22005

Q32005

Quality of Loan Portfolios(%)

TotalClassifieldLoans

Non-performing

Source: BNB

Growth Rates

34%

25%

33%36%

0%

5%

10%

15%20%

25%

30%

35%

40%

November 2004 - November 2005

Assets

Equity

Loans

Attracted Funds

Source: BNB




ROA

1.9

2

2.1

2.2

2.3

2.4

2.5

XII 2002 XII 2003 XII 2004 IX 2005

%

Source: BNB

ROE

0

5

10

15

20

25

XII 2002 XII 2003 XII 2004 IX 2005

%

Source: BNB

EFFICIENCY AND HIGH PROFITABILITY EFFICIENCY AND HIGH PROFITABILITY




INCREASING ROLE OF THE BANKING FOR THE REAL SECTOR FINANCINGINCREASING ROLE OF THE BANKING FOR THE REAL SECTOR FINANCING

Bank credit growth is returning to sustainable level

Banks are predominantly externally funded

Business sector credit demand is investment driven

Long term loans to business sector grow faster than short term

Business sector has a good access to lending from abroad

Residential loans to households are growing very rapidly

CREDIT GROWTH RATES

0%

20%

40%

60%

80%

1999 2000 2001 2002 2003 2004 2005*

Bus iness loans BGN

Bus iness loans FX

Loans to bus iness sector andhouseholds

Source: BNB

CREDIT TO HOUSEHOLDS GROWTH RATES

0%

50%

100%

150%

1999 2000 2001 2002 2003 2004 XI 2005

Consumer

Residential

Loans to households

Source: BNB




CHALLENGES FOR BANKING SECTORCHALLENGES FOR BANKING SECTOR

Smooth adoption of the EU directivesBasle II implementationSustainability of the credit growthInterest rates convergenceMergers and acquisitionsBetter corporate governance and transparency




CHALLENGES FOR BNBCHALLENGES FOR BNB

Short-term challengesFine-tuning of the process of bank lending Enforcement of the new legislation related to the EU membership

–Law on Credit Institutions transposing Re-casting Directive 2000/12/EC relating to the taking up and pursuit of the business of credit institutions, Directive 2001/24/EC on credit institution reorganisation and Directive 2000/46/EC on the taking up, pursuit of and prudential supervision of the business of electronic money institutions; – Consumer Credit Law – Full transposition of Directive 2002/47/EC on financial collateral and Directive 2002/87/EC on financial conglomerates;

Medium-term challenges are linked with the full-fledged EMU membership


www.bnbank.org


www.bnbank.org





Thank you for your attention!

bulgarian national bank bulgarian national bank third annual international finance conference...

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