Banking In Bulgaria

6 Pages 1472 Words

The banks’ place in Bulgarian economy. What could contribute to their more intense invasion in the everyday life of both the individual consumer and the big corporation?

Current situation of Bulgarian banking sector and its place in the economy
Generally, financial intermediation in Eastern Europe is very low. Banks are the main financial intermediary institution in Bulgaria, due to the fact that non-banks are still weak plus that the capital market is also underdeveloped. Banking is the dominant sector in Bulgarian financial market with some 35 commercial banks and total assets of about 14bln BGN as of September 2002 (BNB est.); next there is small but growing insurance sector and underdeveloped stock exchange (trading only small number of shares), some undersized pension funds and several finance houses. This leads to the financials sector inability to provide the capital necessarily for businesses to develop. Reason for this is the perception of high risk in the financial market. The root for this problem lies in the fact that the Bulgarian financial market is still recovering from almost half a decade of bank mismanagement and the severe economic crisis in 1996-1997, when the banking sector experienced one of the world’s worst financial crises. Nevertheless, in the last five years Bulgaria witnessed quick turn in achieving financial stability, well-regulated financial markets and institutions and implementing concrete economic transformation program. Bulgaria, as a member for accession in the European Union, also has started adapting the legal framework to that of the EU. Adjustment to a currency board environment is also crucial for the financial sector.
There are several important characteristics that should be mentioned when considering the current situation of the banking sector.
First, the concentration of the banking sector is considerable. The top seven banks own more than 70% of the total assets and also control t...