PRESS RELEASE
19 June 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 Q3, 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 the 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 77.4% at the end of 2025 Q1. Its deviation from the long-term trend is negative (-20.9 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, the assessment of the countercyclical buffer rate incorporates additional indicators which are focused on developments in the credit market, indebtedness, real estate market as well as the general economic outlook.
In 2025 Q1 lending activity remained elevated. Key factor behind the credit supply was the solid capital and substantial liquidity of the banking system. Household demand for credit was supported by the labor market conditions, which had a favorable impact on real disposable income, as well as by the sustained low interest rates on loans, secured by residential real estate. Stronger credit demand by non-financial corporations was driven by the need for working capital, inventories and financing for investment purposes.
Notwithstanding the positive contribution to profitability, the consistently high credit growth gradually increases borrowers’ indebtedness and the banking system’s exposure towards credit risk. The macro-financial environment, in which banks operate, also impacts the potential for cyclical credit risk materialization. The latest assessment incorporates the fact that increased trade tensions among major economies have intensified downside risks to global economic activity1 and increased risks to financial stability.
Considering this information, the BNB Governing Council applies the whole supervisory toolkit within its mandate – from capital requirements to borrower-based measures. Since 1 October 2024 the BNB activated 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). Initial effects associated with the measure reveal adjustment of lending standards in line with the introduced requirements. Maintaining the requirement for countercyclical capital buffer at 2% during the third quarter of 2026 is intended to support the capital position of credit institutions and their capacity to absorb unexpected losses stemming from the increase of 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.
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1 International Monetary Fund (IMF). World Economic Outlook. 22 April 2025.
