to tear down balkan barriers and raise, instead, a comprehensive functional infrastructure, a regional payments system, a regional energy system, a regional market of financial products and lastly but may be most importantly a regional market of production factors. in martin luther king ’ s words “ we may have all come on different ships, but we ’ re in the same boat now ”. dwelling a little longer on the regional theme, i would like to briefly touch on another problem. the experience of the past year shows that as a result of regulatory capital requirements imposed by euro area supervisors, various bank groups reduced their participation not only in the euro area markets but also in our region. this process, known as deleverage, yielded negative consequences. to prevent such phenomena, policymakers and supervisors of partner economies need to cooperate more closely. in this regard, the vienna initiative is a good but limited cooperation platform. it is conceptualised as an instrument to address emergency crisis situations, whereas the current situation requires platforms for dialogue to enable effective and persistent communication among policymakers. this dialogue should aim at preventing undesired mutual effects ; a more ambitious programme, on the other hand, would aim at drafting and implementing coordinated initiatives of mutual interest. nonetheless, potential emergencies arising from contamination from euro area partners would create additional difficulties and huge effective costs for the economies of the region. therefore, we call for the establishment of appropriate mechanisms and instruments for liquidity provision by the european union to peripheral euro area countries. i believe that the financial integration makes this common defence more urgent, through the right understanding of the common fate of our trade partner economies. i take the opportunity, given the presence of many central bank officials from the region, to call for an en bloc coordinated position in this regard. the experience of the latest crisis showed that the countries which had more space to react, in the form of healthier fiscal balances or the financial system, and in the form of more reliable public institutions, were able to cope better with the consequences of the crisis. this lesson should not be neglected. among other things, it implies timely measures and, through counter - cyclical policies, establishment of the necessary space to buffer potential shocks. likewise, it implies ongoing efforts by macro and micro - prudential policies to minimise financial misbalances across all the sectors of the economy and the financial market. these policies, which are often known as “ leaning against the wind ”, have been and will continue to be part in the logics behind

dimitar radev : positive trends in the banking sector are expected to continue in 2019, however with possible increased challenges publication by mr dimitar radev, governor of the bulgarian national bank, in the quarterly bulletin of the association of banks in bulgaria, issue 56, january 2019. * * * in 2018 the banking sector continued to maintain high level of capital adequacy and liquidity, also generating historically high annual profit. deposits in the banking system increased, lending grew, and the share of nonperforming loans dropped. we expect these positive dynamics in the sector to continue altogether through 2019. loan portfolios are a primary source of operating income for the banks in bulgaria, but credit growth is by definition associated with assumption of new risk. at this stage of credit expansion, banks should continue making adequate efforts to manage the credit risk accumulating on their balance sheets. large part of the central bank ’ s recent activities, in our capacity as a regulator and supervisor of the banking system, is focused on the risk associated with bank lending. the bnb governing council decided to activate the countercyclical capital buffer from this year. in december 2018, the national assembly passed new legislative amendments, proposed by the bnb, which provide us with an additional macro - prudential toolbox of measures regarding bank lending. it includes for example bnb ’ s new powers to require enforcement of limiting the loan - to - value ratio or the debt - to - borrower ’ s income ratio. 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