PRESS RELEASE
17 March 2025
The BNB Governing Council set the countercyclical capital buffer rate applicable to credit risk exposures in the Republic of Bulgaria at 2.0% for 2026 Q2, under an assessment of the countercyclical capital buffer rate in pursuance with Article 5, paragraphs 3 and 4 of BNB Ordinance No. 8 on Capital Buffers, the Combined Buffer Requirement, Restrictions on Distributions and the Guidance on Additional Own Funds.
Pursuant to Article 5, paragraph 3 of the BNB Ordinance No.8, setting of the countercyclical buffer rate shall take into account the reference indicator, calculated in accordance with paragraph 1, the European Systemic Risk Board (ESRB) guidelines as well as other variables that BNB considers relevant for measuring the cyclical systemic risk. With regard to data related to the reference indicator for the countercyclical buffer, the credit-to-GDP ratio calculated according to the methodology published on the BNB website stood at 77.1% at the end of 2024 Q4. Its deviation from the long-term trend is negative (-22.9 pp), which corresponds to zero value of the reference indicator.
As the standardised measure for the deviation of the credit-to-GDP ratio from its long-term trend does not adequately reflect the intensity of cyclical risks, assessments of the countercyclical buffer rate take into account additional indicators which are focused on developments in the credit market, indebtedness, real estate market as well as the general economic outlook.
Lending activity in the private sector remained elevated. Strong credit growth continued to be observed in the household segment. Lending to non-financial corporations increased more significantly in the fourth quarter compared to previous quarters. Prolonged periods of elevated lending activity could lead to accumulation of medium-term risks in the banking sector balance sheet and to increase of borrowers’ indebtedness. In view of the potential build-up of medium-term risks associated with the credit dynamics in the segment of residential real estate loans, the BNB adopted requirements with respect to the indicators on lending standards for collateralization (LTV), debt servicing (DSTI) and maturity at origination and renegotiation of loans, secured by residential real estate (RRE). The measure entered into force on 1 October 2024 and aims at strengthening the mortgage borrowers’ creditworthiness and the resilience of the banking system. The measure is subject to regular macroprudential monitoring and analysis as part of the overall supervisory toolkit (including the countercyclical capital buffer). The requirement for the countercyclical capital buffer at 2%, entering into force from the second quarter of 2026, aims at safeguarding the resilience of the banking system against potential future losses, related to the elevated credit growth. Maintaining the level of the countercyclical capital buffer supports the solid capital position of the banking system and strengthens its resilience to pressure on profitability and capital position caused by the potential rise in non-performing loans and impairments.
Further information about the methodology used and previous decisions is available on the BNB website under the section Capital Buffers.