dimitar radev : spillovers from the ecb ’ s monetary policy decisions are fast and strong statement by mr dimitar radev, governor of the bulgarian national bank, for the iflr yearbook : global banking & financial policy review 2019 / 2020, published on 24 september 2019. * * * there is much discussion these days about the course of monetary policy in the euro area. what global headlines rarely catch, however, is how such policy affects the european economies outside the euro area. bulgaria is an example where, due to the high openness of our economy and the strong financial links with the euro area, spillovers from the ecb ’ s monetary policy decisions are fast and strong. around 50 % of bulgaria ’ s exports go to the euro area. investors from the euro area account for 67 % of our fdi stock. our banking system is dominated by the presence of euro area owned banks, which hold around 55 % of the sector ’ s assets. the monetary policy regime in bulgaria ( a currency board with the national currency fixed to the euro ) is another factor enhancing the direct transmission of ecb ’ s monetary policy. therefore, even though bulgaria is not a member of the euro area yet, it is important to consider how our economy is affected by the ecb ’ s continued accommodative stance. financial stability and its implications are issues to be potentially concerned about. the ecb ’ s monetary policy in recent years has succeeded in sustaining the economic recovery in the eu following the great financial crisis. in the eu countries that are not using the euro, the effects from monetary conditions in the euro area led to improving macroeconomic environment, loosening financing conditions, and high bank liquidity. that stimulated lending and, in turn, the increase in residential property prices. however, these developments also increased cyclical risks. the bulgarian national bank conducted research into bulgaria ’ s financial cycle. our findings showed that we are currently in an upward phase of cyclical risk accumulation. hence, we activated and then raised the rate of the countercyclical capital buffer. we have so far taken two decisions. in 2018, we set the countercyclical capital buffer rate applicable to credit risk exposures in bulgaria at 0. 5 %, with effect from october 1 2019. in early 2019 we raised the rate to 1. 0 %, with effect from april 1 2020. the rate is applied to the overall credit stock of banks and not to the volume of newly issued

witnessed dynamics of the volume and price of debt, require careful attention to the government bonds portfolio as well. as regards the bnb, the answers will come primarily with the use of the macroprudential tools that we have available. this will be done, as it has been done so far, in compliance with the requirements for clear articulation and predictability. if there is no dramatic change in the situation, we will continue to announce the measures one year before they are put in place. these measures will still be focused on banks ’ capital. at this stage, we do not plan to expand them to borrowers. in the end, please let me say a few words about the accomplishment of the strategic tasks whose timeframes are becoming shorter and shorter. in the next 18 months, these tasks will be mostly aimed at completing bulgaria ’ s accession to the euro area. the bnb has provided the necessary organisation with regard to the issues within our competence. the teams include representatives of the association, which is a very positive fact. we are already going into the stage of intense communication and joint work with the ecb. i strongly hope that the political process, with all its unpredictability and uncertainty, will ultimately support, not block, the overall progress of the accession to the euro area. and keeping this hope, i would like once again to congratulate the association, its management, secretariat, and all its members on the 30th anniversary and to wish you good health and much success.