In their desire to shore up customer bases by offering high interest rates on new deposits, Bulgarian banks encouraged customers to chase after the best offer available, with deposit shoppers, who shift their money around in search of the highest return being easily governed by rumours and eroding market stability, Bulgarian National Bank said in its quarterly market review.

The growing deposit rates were putting pressure on people who had outstanding loans, as the soaring prices of both new and outstanding loans were digging deeper in their pockets.

Household deposits and non-credit institutions were the main sources of financing for banks, making them the lenders’ main weapons for protecting and increasing their market share.

The central bank said that in spite of the solid health and stable financial conditions there were processes depleting the resources banks use to hedge against risk. In addition, lenders were growing increasingly vulnerable to a possible surge in the number of bad loans and were losing liquidity potential.

The analysis said that the financial performance of Bulgarian banks did not deteriorate in the first half of the year, when their leading European peers struggled from the fallout of the global financial crisis.

Source: Dnevnik.bg