Bulgarian c-bank raises countercyclical capital buffer to 1.5% as of Q1 2021

The prolonged low levels of interest rates could lead to a substantial increase in indebtedness, making the banking sector’s asset quality, profitability and capital position more susceptible to adverse developments in the economic environment," the Bulgarian National Bank said in a statement on Friday.

The increase of the countercyclical capital buffer rate is aimed at strengthening the resilience of the banking sector to such developments, the central bank added.

The credit-to-GDP ratio amounted to 94.0% at the end of September 2019, showing a negative 40.1 percentage points deviation from the long-term trend, which corresponds to zero value of the reference indicator for the countercyclical buffer.

The countercyclical capital buffer rate will remain at 0.5% until the end of March 2020, before rising to 1% from the start of the second quarter of 2020, and 1.5% from the start of the first quarter of 2021.