The banking system in Bulgaria is stable and has one of the highest levels of capitalization in Europe. This was commented by financier Andrey Gyurov from „We Continue the Change“ for Iskra.bg. Our editorial staff sought him out following the bank failures in the US within three days. When asked what he thought was the cause of what was happening, he replied:
„The failure of Silicon Valley Bank /SVB/ is due to a series of events that in aggregate lead to the observed result. Given the circumstances, it could have been avoided because the bank did not have a fundamental problem in its asset portfolio. The combination of interest rate rises in the US and the bank’s decision to sell some of its long-term assets led to the well-known industry effect of capital losses from interest rate risk. The bank’s poor communication with its customers, on the other hand, generated a loss of trust, which is the other most serious asset of banking institutions. As a result, many customers decided to withdraw their deposits at the same time, leaving the bank facing a liquidity crisis.“
The quick actions of the US regulators led to the guarantee of all deposits in the troubled banks, the expert further commented. According to him, this should reduce the risk of a domino effect, where customer losses in these banks could lead to turmoil in other institutions. On the other hand, the timely response of the institutions should reassure depositors and reduce the likelihood of runs at other institutions as well, he added.
In addition, he expects that the focus on the regulation of medium and small financial institutions (in the US with assets below 250 billion dollars) will be strengthened again, where serious concessions have been made in recent years from the measures taken during the financial crisis in 2009.
In Europe, as well as in Bulgaria, the regulations of smaller financial institutions are at the same level as those for large banks, Gyurov believes. Raising interest rates will be challenging from a capital perspective, he said, but this will not be a problem if banks have sufficient liquidity and are not forced to sell long-term assets. At the same time, higher interest rates will allow banks to increase their profits from traditional lending activities.
Asked whether the banking system in the country is stable, he explained:
„The banking system in Bulgaria is stable and has one of the highest levels of capitalization in Europe. The very nature and structure of deposits in Bulgarian banks, namely a large number of guaranteed deposits of smaller amounts, does not suggest problems similar to those in SVB.“
„In Bulgaria and the EU, deposits are protected up to EUR 100,000 per customer in one bank. The best way to protect yourself is to spread your deposits across different banks so that they are within the guaranteed deposit amount. For larger amounts, I recommend consulting with professional asset management companies that will offer effective solutions to protect the size of deposits and their purchasing power,“, Gyurov advised on how we can best protect our money.
