June 26 (SeeNews) - Bulgaria's central bank said that it has set the countercyclical capital buffer rate applicable to credit risk exposures in the country at 1% for the third quarter of 2020, as heightened activity on the domestic credit market continued in the first quarter of 2019.
"Periods of rapid lending growth may be associated with gradual accumulation of cyclical risks which could manifest themselves if borrowers’ debt servicing capacity becomes impaired by a potential future economic downturn and a rise in interest rates’ risk premiums," the Bulgarian National Bank (BNB) said in a statement on Tuesday.
The credit-to-GDP ratio amounts to 95.7% at the end of 2019 Q1 - a negative deviation from the long-term trend of 42.3 percentage points, which corresponds to zero value of the reference indicator for the countercyclical buffer.
The countercyclical capital buffer rate will remain at 0% until the end of September 2019, and will subsequently be increased to 0.5% for the fourth quarter of this year and the first quarter of 2020, before going up to 1% for the second and third quarters of 2020.
The countercyclical capital buffer rate for the fourth quarter of 2020 will be set in September this year.