The probability of realization of credit risk would grow particularly in an economic slowdown or a situation less favourable than the one observed in the recent years. Presently, we see growing indications of possible problems and increased uncertainty – globally and in the euro area – which could, through certain channels, bring negative effects domestically. From the perspective of the sector, 2019 will also be dominated by the asset review and stress test in several banks. We are at the stage of finalising the preparations for the practical implementation of these processes. They are under the lead of the European Central Bank, but with the active cooperation of the BNB. The asset review, stress test and synchronization of our supervisory practices with the European Central Bank are a very important, though not the only, element of the efforts associated with Bulgaria’s plans for entry of the Bulgarian Lev in the Exchange Rate Mechanism (ERM II) and Bulgaria’s accession to the Single Supervisory Mechanism. These strategic steps should be made simultaneously, according to the plan and the agreements reached with our European partners. In 2019 we expect the positive trends in the banking sector to continue altogether, however with possible increased challenges associated with the general economic environment banks operate in. Concurrently, in the coming months we will evidence processes of potentially long-term consequences directly impacting the sector, aimed at achieving a qualitatively higher degree of integration of Bulgaria into the European financial and institutional infrastructure. 1/1  BIS central bankers' speeches

Monetary policy and exchange rate policy With regard to the implementation of monetary policy, the BOT will continue to safeguard economic stability mindful of the economic cycle, especially the risks arising from global economy. This year, inflationary risks look to moderate from last year. Therefore, monetary policy can shift focus to the promotion of private sector’s growth and ability to cope with elevated uncertainties as a result of more volatile global environment. At the same time, exchange rate management will remain adhered to the principle of flexible movement in line with economic fundamentals. Along with that, the BOT will continue to push forward the “Capital Account Liberalization Master Plan” to allow Thai entrepreneurs and retail investors more flexibility to manage overseas investment. It is hoped that, under this master plan, foreign exchange regulations will be streamlined to help reduce the cost for Thai investment abroad as well as develop domestic financial markets. Initiatives on promoting outbound investment will include expanding investor types and ceiling limits, relaxing existing rules and regulations, and increasing flexibility for risk management. Nevertheless, the BOT will maintain adequate safety valves in line with varying emergency scenarios. In this regard, we expect to organize a public hearing on the “Capital Account Liberalization Master Plan” to gather inputs from all key stakeholders. Financial institutions policy For financial institutions policy, the BOT aims to increase the competitiveness of financial institutions while ensuring continued systemic soundness, promoting efficient risk management, and ensuring their desirable role as effective financial intermediaries.