The Bulgarian banking system is now significantly stronger than in the period following the crisis in 1996/97, Standard & Poor’s Ratings Services notes in an updated report on the Bulgarian banking system.
“Over the past five years, the system has undergone radical transformation, with foreign investors acquiring the major banks,” says Standard & Poor’s credit analyst Magar Kouyoumdjian. “As a result, the system has benefited from modernisation and foreign ownership. It has also retained its dominant position in the local economy, where alternative financial markets are still underdeveloped.”
Following the successful privatisation of the state-owned banks, the banking system is now overwhelmingly owned and controlled by private and foreign entities. Further consolidation is expected, mainly among the smaller institutions.
The regulatory framework of the Bulgarian banking system is strong and improving, and has been adapting to EU standards, accompanied by good banking supervision.
Continuing progress on structural reform and strong macroeconomic performance over the past few years have been underpinned by growing political consensus and are anchored in the country’s fast progress toward its expected EU accession in 2007 and Nato membership in 2004. This, combined with a steady and significant decline in the government’s debt burden, has substantially reduced Bulgaria’s vulnerability and strengthened its transition process.