Bulgaria has a concentrated and competitive banking system with improved risk management processes and regulatory and supervisory frameworks which are getting closer to the European Union standards, Moody's Investors Service said on Thursday as reported by the Finance Ministry.
Overall, the rating agency considers that the Bulgarian regulatory system is well-established with a good level of supervision exercised by the banking regulator, the Bulgarian National Bank (BNB). The regulatory and supervisory framework is continuously evolving in line with the EU's regulations and standards, Moody's said in its Banking System profile report on Bulgaria published on its website.
According to Moody's, the domestic operating environment of the banking system in Bulgaria has been negatively affected by the global financial crisis and as a result there is lower inflow of foreign direct investment (FDI), lower credit demand and more cautious approach from banks towards lending.
Bulgaria has shown strong reform momentum since July 2009, but further steps are needed to comply with best practices and higher governance standards, Moody's added.
Bulgaria has a deposit-insurance guarantee scheme, which provides coverage to an adequate portion of private-sector customer deposits in the country. Additionally, the Bank Deposit Guarantee Act includes provisions for different tools that can be used to prevent banks from defaulting, Moody's said.
Bulgaria's banking system comprises 24 domestically-registered banks and six branches of foreign lenders.