of supervision for many years in bulgaria. with respect to bank regulations and the supervisory tools and practices, today bulgaria is rather advanced, and not a “ catching - up ” economy. this is also true for most of the other countries in the region as well. as the crisis unfolded, the quality of assets deteriorated with npls reaching 11. 9 % by december 2010 ( up from 2. 4 % at the end of 2008 ) but sufficient capital buffers were preserved. the banking system continued to make profits despite the rise in non - performing loans and the subsequent increased provisioning. today the average capital adequacy ratio bis central bankers ’ speeches exceeds 17 %, with tier 1 capital adequacy above 15 % and overall liquidity ratio of around 24 %. that is not the case in the most developed markets. beware of superficial announcements it is equally important to stay aware of the consequences of speculative public speaking and bad communication. despite even the most prudent policies and sound financial fundamentals, stability may be put at risk by repeated negative superficial public comments. let me tell you now that an important share of our work during the crisis was devoted to monitoring and promptly reacting against the numerous ridiculous statements that were coming from abroad, even from international financial institutions of good reputation. that is why two months ago the bulgarian national bank organised a seminar for the local media where we presented a “ top 30 ” list of failed doomsday scenarios and forecasts made by foreign and bulgarian observers since 2008. the greeks are well aware how the accumulation of adverse market sentiments may lead to “ self - fulfilling prophecies ”. and a few words on the so - called “ greek ” banks in bulgaria. this may serve as another example in this respect. after one year of much talking about them, these subsidiaries have kept doing well. there has been no withdrawing of liquidity from bulgaria to support the parent institutions in greece, nor have local residents moved their deposits to other banks. the banks ’ shareholders confirmed their long - term commitments to stay and even expand activities in bulgaria to exploit the opportunities on our market. generally, the indicators of greek subsidiaries in bulgaria are equal or higher than the average of the system as a whole. we as supervisors and guardians of financial stability had to spend much time to dispel all the rumours and fears. these efforts were not in vain. continuing reforms, letting banks work governments need to stay firm in their efforts to conduct fiscal consolidation complemented by the necessary structural

the rest of the continent. the case of bulgaria : using growth to save for a rainy day by way of illustration, let me focus on the experience of bulgaria. my country went through a severe banking and financial crisis in 1996 – 1997, when one third of the banks went bankrupt. there was hyperinflation and the confidence in the national currency vanished. that prompted the introduction of a very conservative monetary regime, the currency board, in july 1997. after that, inflation and interest rates went down swiftly and sustainably. since then the bulgarian economy has been growing in an environment of practically non - existent exchange rate risk, with highly flexible labour markets, hard budget constraints and fiscal discipline. the ratio of public debt to gdp fell from 105 % in 1997 to 16 % in 2010. the currency board arrangements are and will be our main anchor of stability and predictability till the euro adoption. irrespective of all electoral cycles, the support for the currency board by the business community, the general public and all political parties has stayed intact. the current crisis started to affect bulgaria towards the end of 2008, with the decline in external demand and the lower capital inflows. however, the banks in bulgaria did not have any exposure to foreign “ toxic ” assets and did not suffer directly from the “ domino effect ” of collapsing financial institutions abroad. the bulgarian case was different from the anglosaxon scenario because we had learned our lessons from 1996 – 1997 and we had accumulated enough reserves to serve as a cushion. to talk in numbers, the government entered the crisis with a fiscal reserve of 12 % of gdp at the end of 2008. the gross international reserves of the bulgarian national bank were 36 % of gdp then. the banking system average capital adequacy was 14. 9 % in december 2008. our banking system has never been a source of problems. engaged in traditional commercial banking, our banks were affected by the crisis only when the general economic activities declined and as a result some of their clients found it harder to service their loans. the banking system itself withstood the crisis, displaying outstanding soundness and stability. but this did not happen on its own, neither was it simply due to the presence of reputable names on our market. we, the bnb, as supervisors have always believed that the good times with strong growth must be used to “ save for a rainy day ”. the consistent countercyclical policies of the bis central bankers ’ speeches bulgarian national bank played a