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Our expectation, as well as that of our European partners, is that the permanence in the monetary mechanism will not last long. The purpose of this stay is to demonstrate formal compliance with one of the Maastricht criteria (for exchange rate stability), something that the currency board provides us without any problem. This was stated by the governor of BNB, Dimitar Radev, in an interview published on the BIA website, writes Money.bg.
“We greatly appreciate the support for our efforts provided over the years by employers’ organizations and trade unions in Bulgaria. This support was a key element in forming broad public support for the goal of deepening the country’s European integration. Our adhesion to ERM II and the Banking Union is an accomplishment to that end, “he said.
According to him, before adopting the euro, individual countries had different periods of participation in ERM II. The record holder is Lithuania – 10 1/2 years, except, of course, Denmark, which has been participating in ERM II since 1999, but does not plan to join the eurozone.
Will the euro raise prices?
According to Radev, this will not happen. “This is a speculative statement, which is not supported by facts in the history of the introduction of the euro in other countries. All the historical statistics in such cases are clear: an increase is reported for very few goods and services. And even with such It is not clear whether individual increases are caused by a currency exchange. “
In the long term, both prices and income in Bulgaria are expected to rise. This will be a normal consequence of the real convergence of our economy to the euro area. The currency we use is not in itself a factor in raising or lowering prices.
Will bank fees and commissions be reduced after we join the euro zone?
The prices of banking products and services are mainly a function of the level of development and competition in the sector. They are not derived directly from the currency we use, Radev said.
However, at the same time, joining the euro area would be a key stage in accelerating and deepening the integration of the Bulgarian financial sector into the euro area. This, other things being equal, will mean that our banks will operate in a more complex and competitive environment, which is logically profitable to be clients of the banks.
Will there be easier access for Bulgarian companies to the credit resources of European banks?
European banks are still here today. The predominant part of the banking sector in Bulgaria is made up of banks that are part of European banking groups. These banks can borrow resources from their “mothers” in the euro area to use for loans to Bulgarian businesses and households.
The single market rules also allow direct access to credit for Bulgarian companies from banks operating in other EU member states (whether in the euro area or not).
For this to happen in practice, however, it is necessary at least that the bank knows the company well. The borrower must present and the lending bank must evaluate financial and commercial indicators, potential risks, credit history, legal regime for the constitution and sale of guarantees. And the provision of credit, ultimately, must be at a price acceptable to both parties.
What were the effects of the pandemic on the banking system of Europe and Bulgaria?
According to Radev, our banking system faced the situation with COVID-19 in very good condition, expressed in high capital adequacy, strong liquidity position and decrease in the share of delinquent loans.
The effects of the pandemic and the restrictive measures introduced remain to be seen. Initial negative expectations in banks related to the ability to generate losses due to the strong deterioration profile of their clients were mitigated by the moratorium introduced on the deferral of liabilities to banks.
In March this year, the BNB adopted a comprehensive package of measures aimed at further strengthening the capital and liquidity of banks.
In the second quarter, the resource for households grew by BGN 937 million and for companies by BGN 440 million. This is generally the result of a combination of three factors: confidence in the banking system, insufficient investment alternatives, and motivation to save. due to the economic uncertainty surrounding the pandemic situation.
During the same period, we introduced new credit reports in connection with the implementation of European regulations. The change already excludes the item “cash balances in central banks and other demand deposits” from the scope of gross loans and advances. Without this methodological change, that is. According to comparable data, in the second quarter gross loans and advances had a minimum increase of BGN 95 million.
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