The forthcoming review of the Bulgarian bank assets’ quality is estimated to take some EUR 850,000 /VAT not included/. Still, the branch sees it as prophylaxis that shall confirm the good health of the banking system.

The future monitoring is implemented within the National Reform Strategy due to the crisis with the bankrupted Corporate Commercial Bank /CCB/. Now the question is whether such events are predictable and in the opposite case – does the psychological effect justify the expenses?

The Central Bank of Bulgaria /BNB/ had to monitor on a regular basis all commercial banks before the collapse of the CCB, headed by Tsvetan Vassilev and the catastrophe hadn’t been seen. When the banking institution was placed under specialized supervision the auditors appointed by the regulator declared that a large part of the loans would have to be classified as a loss. However, the lack of any access to the credit files and the new for our system method for assessment caused the suspicion that the whole math exercise was purposed to suit the results with the thesis, spread in advance among the public, expert Grigor Staryiski from the Economic Research Institute with the Bulgarian Academy of Science states.

At the same time the CCB bankruptcy, still unexplained by the BNB starts to look more and more like a crisis, caused by the bank itself. Such events are very rare and practically those cannot be implemented within the limitations of a single research, the finance expert further comments. The assessment of the banking system is expected to show which the most unstable banks are. On the other hand, one can get some info at the moment, in BNB statistics, in its part, related to liabilities of banks.

“In fact the idea of the stress test is for concrete parameters to be taken from all bank assets, thus making a real assessment of their value,” Grigor Staryiski says. “Loans are the main part of banking assets, i.e. we need to have information on the loans, on those who received them and the chance for their return can be assessed according to these parameters. There is a periodical assessment of loans now as well. However, many of the banks still lack the parameters required for this assessment. Software updating is necessary, along with the implementation of new methods and the involving of additional experts. The procedure is pretty heavy and it needs its careful approach.”

The procedure was envisaged to take place in 2016, but the terms have been shortened as we see. The Premier has recently thrown a TV bomb with the contradictory statement on the state having supported a number of banks till the moment, in order for those not to collapse – and that said in a situation with a lack of enough transparency and a banking system, claimed to have high liquidity.

That is how the expert Staryiski comments the processes with the financial sector:

“The assets of the so-called Greek banks have been going down as of end-2014. I presume that those needed some liquidity support. Secondly, but I can only guess here due to the scant official information, there was a period of active breaking of deposits into smaller ones, i.e. those of more than EUR 100,000 got  fewer. If a bank has large deposits concentrated in it, it might need liquidity support at a certain point, when the customers have begun to split them into smaller accounts. Our banking system is a stable one, but not a bank can bear an aimed attack or an event that is very unlikely to happen, such as the fragmentation of deposits.”

The forthcoming stress tests won’t solve the major issue: the lack of transparency. There is not enough data on commercial banks in Bulgaria, published per trimester and the resumed info on the entire system is published each month. The Central Bank of Moldova for instance publishes monthly detailed data on each credit institution – and the sector is more transparent there.

English version: Zhivko Stanchev