CUSTOMERS TEND TO PREFER DEPOSITS IN BULGARIAN CURRENCY
BNB Vice Governor Bozhidar Kabakchiev to the BANKER weekly
Mr. Kabakchiev, how would you explain the continuous, although short crises, which have been shaking up the BG lev market for several months now?
- These crises seem to have taken on cyclic recurrence, which is quite unpleasant as the periodical disappearing on levs from the market are connected with events that are well-known and can be foreseen. The last crisis, for example, arose in connection with due payments of social insturance provisions and pensions. Both the size of these payments and the period when they are effected are not a secret to the banks, but their employees have obviously failed to figure out what volumes of levs they should set aside. I would like to point out that these crises do not at all mean that the banking system has problems concerning payments. They rather show that the liquidity of the credit institutions is not yet managed in the best possible way. Otherwise, the banks have at their disposal sufficient cash to service all their liabilities. It is a fact that the average interest rate on interbank deposits is lower that the base interest rate. This shows that there is no excessive demand for levs on the market. More than 90% of the interbank deposits are not secured, which is indicative of the trust in the realtions between banks. The price of the purchased currency is the third indicator. The average-weighed market exchange rate of the BGL against the USD is lower that BNB's official exchange rate. This also shows that there is sufficient money resource. There are many other indicators as well, from which we can judge that the banking system is sufficiently solvent. The coefficients of banks' primary and secondary liquidity are at very good levels. Banks have no problems in fulfilling the requirements to the mandatory amounts of minimum reserves they should be keeping at the central bank. It is interesting to know that in end-July, 2001 the broad money, including cash in circulation and bank deposits, for the first time exceeded BGL10BN, marking about 7% increase. This shows that the economic activity in the country is picking up and confirms my words that banks have sufficient money resource. Bank deposits have risen by 16% since the beginning of 2001, and deposits in BG levs are increaseng at a much higher rate. This fact is also indicative of the growing trust in our national currency.
Could we already speak about a reorientation of banks from investments in deposits and securities to increasing credits?
- If you look into the balance sheets of the banking sector, you will notice that credits picked up by 8% till mid-year. Loans, extended from the beginning of 2001 alone total BGL1.35BN. It is important to underline that there is a tendency of levelling the volume of recently lent long-term and short-term credits. Formerly, short-term credits predominated, but the share of loans with a longer repayment period definitely goes up lately. Credits in BG levs also increase as compared to credits in foreign currencies.
Does that mean that demand for levs on the market will be growing in the future?
- Such a tendency can be observed even now. The BNB has purchased EUR150MN on the market since the beginning of the year. This also bespeaks of higher economic activity in the country. The increase in the banks' credit portfolios also proves that. Creditting will be rising further after passing the long-discussed amendments to the Code of Civil Procedures and to the Penal Code, which will allow banks to collect the recivables from their debtors quicker.