Bulgarian banks will put forward a set of measures for implementation by the Government, designed to improve market conditions and preparing the ground for a long-anticipated cut in lending rates.

At a meeting with Finance Minister Simeon Dyankov on November 4, bankers pledged to submit the package of proposals within a week before joining forces with the ministry to forge a joint statement on relaxing market conditions.

"We discussed ways to secure cheaper resources from global markets as well as options for better absorption of European funding," said Violina Marinova, chairperson of the Association of Banks in Bulgaria and chief executive of DSK Bank, the local unit of Hungary’s OTP Group.

"At a later stage, we will outline specific measures to improve the economic environment," she said.

Possible options include beefing up legal protection for creditors against delinquent borrowers and changing a requirement to fully secure state funds deposited in commercial banks with Government securities, said Assen Yagodin, chief executive of Postbank, part of Greece’s Eurobank EFG Group.

Banks and the Finance Ministry will work together to seek ways to lower the cost of funding that local lenders use to make loans.

Loan interest rates will fall when the right conditions are in place, such as a flattening of the deposit market, where banks now pay an average interest of seven to eight per cent for euro-denominated deposits and nine to 10 per cent for deposits in leva. This compares about two to three per cent paid by banks in other European markets, bankers said.

The skyrocketing deposit rates were fuelled by an all-out war between local lenders, which scrambled to attract local savings after the economic tailspin sucked out liquidity and funding from their foreign parents was reduced to a trickle. Central bank statistics, however, showed that deposit growth began to cool off in the third quarter.

Earlier this week, Prime Minister Boiko Borissov said he had met with bank officials to ask for lower lending rates.

"If the prime minister asks you something, you must consider it seriously," Levon Hampartzoumian, chief executive of UniCredit Bulbank, told Bulgarian National Television. On a more serious note, he said, market conditions were expected to stabilise and demand for loans will rise again.

Source: Dnevnik