March 20 (SeeNews) - Bulgaria's central bank said on Monday that it will maintain the countercyclical capital buffer rate applicable to credit risk exposures in the country at 2.0% in the second quarter of 2024, having increased it to that level as of October 1, 2023 and having kept it there for the first quarter of 2024.
The measure reflects the ongoing dynamic lending activity against the background of very low real interest rates, coupled with high levels of capital adequacy and liquidity in the banking system, the Bulgarian National Bank (BNB) said in a statement.
While the growth in lending volumes lifts banks' short-term profitability, it may lead to higher debt and greater risk on banks' balance sheets. In light of the volatile energy prices, supply chain disruptions and likely drop in external demand, non-performing loans and impairments may grow as the effect of rising global interest rates starts trickling down to domestic ones in the coming months, the BNB said.
In December, the BNB said that it is keeping the countercyclical capital buffer rate at 2.0% for the first quarter of 2024.