Bulgarian National Bank : In relation to the continuous uncertainty and the challenges relating to the economic effects from the spread of COVID-19 and the restrictive measures imposed, the Governing Council of the BNB made a decision to maintain the implementation of the macroprudential measure for capitalization of the full extent of banks’ profit for 2020

PRESS RELEASE

28 January 2021

In relation to the continuous uncertainty and the challenges relating to the economic effects from the spread of COVID-19 and the restrictive measures imposed, the Governing Council of the Bulgarian National Bank (BNB) made a decision to maintain the implementation of the macroprudential measure for capitalization of the full extent of banks' profit for 2020. Given the aggregate financial result as of 31 December 2020 in the amount of BGN 789 million^[1], a continuation of the measure would increase the common equity tier 1 (CET 1) capital ratio of the banking system by 1.23 percentage points to 23.1% which, other things equal, additionally strengthens the capacity of banks to absorb losses from possible deterioration in the quality of the loan portfolios. The positive capital effect from capitalizing the profit of banks preventively decreases their sensitivity to the realization of credit risk, maintains the stability of the banking system and facilitates banks to continue carrying out the function of financial intermediation through the provision of credit to the economy and households.

Measures for further strengthening the capital and liquidity of banks, adopted by the BNB Governing Council in March 2020 remain active.

^[1] Data used for the financial result during 2020 is based on the submitted reports as of 26 January 2021 and may be subject to change.