The Bulgarian National Bank (BNB) has decided to increase the countercyclical capital buffer to 2.25%, in a move aimed at easing pressure on the rapidly growing housing credit market and strengthening the resilience of the banking system.
The measure is designed as a preventive tool that requires banks to set aside additional capital during periods of strong lending growth. It is intended to build financial buffers that can be used if economic conditions deteriorate, reducing systemic risk and limiting potential instability in the sector.
Financial analyst Boris Petrov commented that the central bank was continuing a long-standing approach.
“The BNB took a brief pause and is now resuming these preventive measures with the aim of preserving capital buffers in the banking sector and cooling the high pace of credit growth,” he said.
According to real estate sector representative Anton Andonov, the decision is unlikely to have an immediate impact on borrowers.
“This will not directly affect the lending process, as it concerns the setting aside of reserves as a ratio between banks’ risk exposures – that is, loans – and their own capital,” he explained.
The central bank’s decision continues a policy line maintained since 2017, placing Bulgaria among European countries with relatively strict macroprudential requirements. Even after eurozone entry, the institution remains among the more conservative regulators in the region, alongside countries such as Denmark, Sweden, and the Netherlands.
Authorities cited both domestic economic conditions and broader global uncertainty as key factors behind the increase. Lending activity has remained strong, with credit expansion continuing at a high pace in recent months.
Petrov noted that liquidity conditions and strong bank capital positions had supported this trend.
“The trend of elevated credit growth continues, which this year could have been further supported by the release of high liquidity through the reduction of minimum reserve requirements by the BNB, as well as by the strong capital indicators that Bulgarian banks maintain,” he said.
Despite the tightening measure, experts expect limited immediate effects on households and mortgage access. The banking sector is considered well-capitalized, and no sharp disruption in lending conditions is anticipated.
Andonov added that changes were more likely to be gradual.
“We do not expect significant changes in lending. Growth may slow, meaning we are unlikely to see such large increases in lending, and in terms of the property market – yes, we recorded a decline in the number of transactions in the first quarter, but this is not unexpected,” he said.
Petrov also pointed to early signs of cooling in the housing market.
“There is some slowdown in property sales. Some consider this a temporary measure. Overall, it points to a gradual soft landing,” he said.
The increased buffer requirement will take effect on March 31 next year, giving financial institutions time to adjust their capital planning accordingly. (Novinite)