March 29 (SeeNews) - Bulgaria's central bank has set the countercyclical capital buffer rate applicable to credit risk exposures in the country at 1%, in effect from April 1, 2020, it said on Friday.
The buffer will remain at its current level of 0% until the end of September, and will then go up to 0.5% from October 1 until the end of March 2020, the Bulgarian National Bank (BNB) said in a statement.
"Increasing the countercyclical capital buffer rate during a period of favourable economic conditions could help preserving and further strengthening the banking system's capital position, thus increasing the credit institutions' resilience to future materialisation of credit risk," the BNB explained.
The claims of the domestic banking system on the non-government sector are continuing to increase at relatively high rates, which could be associated with gradual accumulation of cyclical risks, potentially manifesting themselves in an increase of non-performing loans in the event of future economic downturn and/or rise in interest rates, the BNB said.