Bulgarian National Bank warns about rising indebtedness risk

The Bulgarian National Bank (BNB) has once again warned that while high credit activity in the country helps domestic consumption and economic growth, it also carries a risk of increasing indebtedness.

Prolonged periods of increased credit activity create prerequisites for the potential accumulation of medium-term risks in the balance sheet of the banking system," the BNB writes in its latest "Banks in Bulgaria" report.

The document reminds us that on October 1 last year, the bank regulator tightened the rules for housing loans and introduced new requirements for banks when granting mortgages.

The BNB points out that the banking system in Bulgaria continues to function against the dual backdrop of “increased geopolitical uncertainty in the external environment”, but also a “relatively favorable” domestic one, where credit activity remains high. As a result, the banking system reported an 8.1% increase in its profit, reaching 1.8 billion euros last year.

According to the report reflecting the state of the banking system in the last quarter of 2024, there was growth in lending activity, mainly from the 4.6% growth of loans to households (about 1 billion euros). At the same time, households continue to save their money, as the increase in their deposits has outpaced that of loans - it was 4.9%, or 2.15 billion euros.

Translated by Tzvetozar Vincent Iolov