Dimitar Radev: The Bulgarian banking sector in 2020 – how have we coped and what is forthcoming Publication by Mr Dimitar Radev, Governor of the Bulgarian National Bank, in the Bulletin of the Association of Banks in Bulgaria, issue 64, December 2020. * * * Dear Colleagues, We are approaching the Banker’s Day in a year of unprecedented challenges: first, in relation to the consequences of the COVID-19 pandemic; andsecond, with the completion of the strategic project of the entry of the Bulgarian Lev into the European Exchange Rate Mechanism (ERM II), simultaneously with the accession of our country to the European Banking Union, including to the Single Supervisory Mechanism and the Single Resolution Mechanism. From the banking sector’s perspective, there are two key questions: how we have coped to date, and what is forthcoming? Our goal, defined as early as the start of the crisis, was for the banking sector to generate solutions, rather than problems. As a result of our effort in the recent years, we were well positioned for the attainment of this goal. The banking sector ‘entered’ into the crisis with a Common Equity Tier 1 capital adequacy of over 19%, and with a liquidity coverage ratio of over 260%, i.e. times above the regulatory requirements. Regardless of the good starting position, we were aware that, because of the abrupt deterioration of the environment in which banks operated, there should be new measures for further strengthening of their capital and liquidity positions.

We have made very significant progress on a resolution regime for the 21st century. The powers, international standards and institutions are all in place. The authorities and the banking system have strong and common incentives to complete the implementation. It is in all our interests that we do so. 14  8  See Carney (2014). BIS central bankers’ speeches  References Afonso, G, Santos, J A, and Traina, J (2014) ‘Do 'Too-Big-To-Fail' Banks Take on More Risk?’, Federal Reserve Bank of New York Economic Policy Review 20(2). Bank of England (2015) ‘The Bank of England’s approach to setting a minimum requirement for own funds and eligible liabilities (MREL)’, Consultation on a proposed Statement of Policy, available at http://www.bankofengland.co.uk/financialstability/Documents/resolution/mrelconsultation2015 .pdf. Brooke M, Bush O, Edwards R, Ellis J, Francis B, Harimohan, R, Neiss, K and Siegert, C (2015) ‘Measuring the Macroeconomic Costs and Benefits of Higher UK Bank Capital Requirements’, Financial Stability Paper 35. Button, R, Knott, S, Macmanus, C and Willison, M (2015) ‘Desperate adventurers and men of straw: the failure of City of Glasgow Bank and its enduring impact on the UK banking system’, Bank of England Quarterly Bulletin Q1. Carney, M (2014) ‘The future of financial reform’, Monetary Authority of Singapore Lecture. Financial Stability Board (2015) ‘FSB issues final Total Loss-Absorbing Capacity standard for global systemically important banks’, Press release, available at http://www.fsb.org/2015/11/tlac-press-release/. Financial Stability Board (2015) ‘Assessing the economic costs and benefits of TLAC implementation’. Herring, R J and Carmassi, J (2014) ‘Complexity and systemic risk’, The Oxford Handbook of Banking, 77.