Four foreign banks have already left Bulgaria during the past three years. Although the European banks are still prevailing on the Bulgarian banking market, their share at the end of 2013 has shrunk by 10%. Thus, the foreign possession in the Bulgarian banking sector has gone down to 70% of the whole banking market.

One of the reasons why some foreign banks have left Bulgaria is linked with the fact that they are now trying to solve their own problems. All four banks which already done so had gone through serious capital turbulence. In order to become stable, they received serious capital injections by the European Commission as well as by their own governments. Thus, the Western Europe’s banks have withdrawn their subsidiaries from Bulgaria due to weak activity. The financial and economic crisis is another reason why the banking sector is not so attractive for foreign investors. It provided opportunities for local companies to buy out the assets of huge European banks which leave the Bulgarian banking sector. The main market of our finances is Bulgaria - this is the market where adequate forecasts can be made, especially in times of crises or depression. Financial expert Dr. Emil Harsev comments for Radio Bulgaria.

What has provoked the changes in the Bulgarian banking sector?

“These changes are by no means bound up with the Bulgarian market. They are linked with the influence of the crisis over the banking groups themselves which operate on the local market as well as on other European countries”, says Emil Harsev in an interview for Radio Bulgaria. “Nearly all European states had problems regarding bad loans and losses incurred by leading banks. When a certain bank experiences problems in its main activity, then the periphery is affected the most, although sometimes this periphery is the most lucrative one. However, this is the main action strategy in times of crises-all side activities are cut and the bank focuses on its main business. The state institutions in some countries which provided financial injections to their banks asked them to leave peripheral markets. Such was the case with Germany for instance. So, we can not make any radical conclusions about the Bulgarian banking sector. The decisions of certain banks to leave the Bulgarian market were taken due to reasons which have nothing to do with Bulgaria”.

The large European banks turned from buyers into sellers. Who purchases their assets?

“The Bulgarian business will buy back all banks and enterprises which are now owned by foreign companies which can not withstand the competition at the local market”, contends Emil Harsev. “The share of the Bulgarian capital will go up in the banking sector as well as in the real economy.”

Are 30 banks too many for the small Bulgarian market?

“No, this number is not too high. It all depends on the profile of the banking system. Austria is not bigger than our country in terms of some fundamental parameters. Since there are over 300 banks in that country, 30 are not too many for Bulgaria. It all depends on the coverage, rather than on the number of the individual financial institutions operating on a certain market. There were periods for example before 2007. i.e before the time when the crisis was in its full swing, when we were seriously worried that the banking network was too developed to feed on this market only. Now certain companies are leaving this market and the branch network is shrinking. The banks which operate in Bulgaria realized that a dense coverage built before the start of the crisis is inexpedient. All banks are gradually reducing the number of their branches at present”, concludes Emil Harsev. 

English version: Kostadin Atanasov