104 - ECONOMY - FINANCES - BANKS - TRENDS

Bulgaria at Euromoney Conference for
Central and Eastern
Europe


Vienna, January 21 (BTA) - In 2015 Bulgaria hopes to know what
structural measures are needed to allow it into the euro zone
and see what is a feasible time horizon for joining the banking
union as a first step in the integration of this country in the
institutional structures of the European Monetary Union,
UniCredit Bulbank chief economist Kristofor Pavlov told the
Bulgarian press on the sidelines of the annual Euromoney
conference for Central and Eastern Europe. The forum is held in
Vienna January 20-21.

In his remarks at the forum, Pavlov presented the trends and
upcoming changes in the banking sector in Bulgaria in 2015
stressing that such changes will have to be an answer to the the
crisis in the banking sector last summer and to make sure that
it will not happen again. More changes are set out in the plan
of reforms in the global financial system agreed by the G20
countries and the Global Stability Board, aiming to make the
financial system more secure, more simple, transparent and just.


Dwelling on Bulgaria's entry in the euro zone, Pavlov said that
what is clear today is that the progress is pegged on making
headway in the combat against corruption and organized crime,
achieving the EU standards for functioning of the judicial
system and rule of law, and, last but not least, successful exit
from the current Cooperation and Verification Mechanism whereby
the European Commission monitors Bulgaria's progress in
fighting graft and organized crime.

Pavlov said that fast entry in the Banking Union is largely seen
in Bulgaria as a step in the right direction as it is expected
to bring about making this country a predictable and accepted
player, and step up entry in the euro zone.

According to a uniCredit Bulbank analysts, the operational
environment for banks will remain difficult in 2015 as the
collection of receivables is expected to remain slow and
expensive in the conditions of a slow recovery of economic
activity and employment in combination with persistent
deflation.

Demand for new loans is very much likely to remain weak under
the additional constraints of the slow and uncertain recovery of
the real estate market. On this background, interest rates will
edge further down - though not as fast as in the second half of
2014.

The loans-to-deposits ratio will continue to decline.

Pavlov argued that the situation calls for measures to improve
the efficiency of the banking sector, especially in view of the
worsening costs-to-revenue ratio in the recent years.

Taking a question, the Bulbank chief economist said that
Bulgaria's needs of funding will be smaller this year than they
were last year, which is good news. In the area of fiscal
policy, Bulgaria showed good results and the increase of the
public debt last year is not seen as a risk to macroeconomic
stability: it will become a risk if the trend persists for
five-six years, he added.

UniCredit Bulbank CEO Levon Hampartsoumyan, who is also chairman
of the Association of Banks in Bulgaria, commented for
reporters in Vienna that Bulgaria's entry in the euro zone and
the European Banking Authority will be good for the banking
sector and the economy as a whole, and should happen as soon as
possible.

He also argued that it is the process of accession that matters,
and not just the accomplishment of the goal.

He said that the process should include reforms in the judicial
system, education and the security sector "but this is easier
said than done and requires consistent efforts and continuity".

He does not expect the introduction of the euro as the national
currency in Bulgaria to cause a price shock. "We have had the
national current pegged to the euro for quite a long time now
and any adverse effects have been absorbed by the system," he
added.

On the other hand, with the euro Bulgaria will have the
advantage of becoming a member of a powerful union and all other
things being equal, interest rates will head down, he also
said.

While he believes that Bulgaria should join the euro zone the
soonest possible, he is against setting deadlines "because we
will cause ourselves a big disappointment unless we make the
necessary preparation". LY/LN/





/СН/