September 21 (SeeNews) - An increase in private investment can contribute to a strong and efficient non-performing loan (NPL) market in Bulgaria, where bad loans remain a problem restraining the banking sector and holding back the economy, the European Bank for Reconstruction and Development (EBRD) said.
More investment can free up the potential for fresh lending to the real economy as banks restructure their balance sheets and increase their capacity to provide new credit to businesses, EBRD said in a statement following a workshop held under the Vienna Initiative in Sofia on Wednesday. The bank leads the NPL work of the Vienna Initiative, which is a framework for safeguarding the financial stability of emerging Europe.
The workshop brought together representatives of Bulgaria's central bank, BNB, and commercial banks operating in the country, government officials as as well as representatives from international financial institutions. They discussed further reforms needed to create an environment that will unlock NPL investment by private investors, which will ultimately lead to a deeper, more liquid NPL market and a sustainable resolution.
"While the BNB has taken steps to support the reduction in NPLs and progress has been made, with the NPL ratio dropping from 14.8% in March 2015 to 12.4% in March 2017, overall levels remain high," EBRD said.
Key challenges identified for attracting private investors include improving the capacity for NPL servicing and the skills required for restructuring, improving data transparency, including in collateral valuation, and developing incentives for out-of-court restructuring.
The EBRD is a leading institutional investor in Bulgaria. To date, the bank has invested over 3.6 billion euro ($4.3 billion) in the country, with a record 620 million euro in 2016 alone. In the years ahead, the bank will aim to keep its level of investment at around 200 million euro per year in response to local demand.
($=0.8413 euro)