The Unassuming Economist

From the IMF’s latest report on Bulgaria:

“Despite recent measures, credit risk could increase, including due to spillovers from the war. During the pandemic, macroprudential measures provided banks room to manage a possible deterioration of loan quality without limiting credit flows, while broader measures supported borrowers’ repayment capacity. Nominal credit to households is now growing at a rapid pace, driven by housing mortgages. To prevent the buildup of new risks, the BNB appropriately announced gradual increases in the countercyclical capital buffers (CCCB), up to 1.5 percent in 2023 from 0.5 percent currently. Possible further increases will need to consider the strength of the recovery to ensure that credit to corporates remains sufficiently available to support private investment. The introduction of borrower-based measures could also be considered if signs of overheating in the real estate market were to emerge. Supervisors should continue to ensure that banks monitor asset quality for possible deterioration and proactively resolve NPLs, as credit risks may rise with the lagged impact of withdrawing COVID-19 related support, the impact of surging commodity prices and supply-chain disruptions on corporates, rising interest rates, or the emergence of imbalances in the housing market.”