Bulgarian banks have withstood European stress tests as well as capital and asset controls, the Supervisory Board of the European Central Bank reports. Six Bulgarian banks have been tested, including the four largest ones – UniCredit Bulbank, DSK Bank, United Bulgarian Bank, Central Cooperative Bank, as well as the smaller First Investment Bank and Investbank. Checks were triggered by Bulgaria's desire to join the Eurozone and obey European rules in the field of banking and finance.

The tests and inspections actually confirmed the results of the Bulgarian National Bank's analysis of the situation in the banking sector, prepared three years ago. Back then, it became clear that Bulgarian banks are in very good shape and are able to withstand potential economic and financial crises as they had sufficient capital, quality assets, reserves and good liquidity.

However, ECB checks were also needed as part of the procedure for joining the European Banking Union and the ERMII exchange-rate mechanism prior to joining the Eurozone itself. Such procedures had not been applied to the current members of euro area and Bulgaria is a pioneer in this regard. From now on, all other European countries wishing to adopt the euro as their currency will have to go through the same path.

The Bulgarian National Bank commented that “Bulgaria is the first country in which the ECB conducts an asset quality review under IFRS 9 international accounting standards. All this means that under the much stricter requirements nowadays, the results of the review are not worse than those obtained in the 2016 BNB review. And this is a remarkable success." The opinion of Petar Andronov, chairman of the Association of Banks in Bulgaria (ABB) is similar. He has pointed out that Bulgarian banks showed very good performance during the European stress tests.

Not everything in the Bulgarian banking system is perfect, of course. Two of the banks audited proved to have insufficient equity and more risky assets than what is normally accepted in Europe. The important thing here is that both the BNB and the banks themselves have declared that measures are being taken for achieving full compliance with European requirements.

The review of Bulgarian banks by the European Central Bank is in fact the first real step towards Eurozone membership. In the autumn this country is expected to receive a green light to join ERMII. Whether this would happen is not entirely certain. Firstly, because in addition to financial conditions there are many other requirements for this country. Even with the best will and active policy, there are issues that cannot be immediately solved. Just like the low standard of living of the population, problems plaguing the justice system, etc. Bulgaria hopes that once it entered the Eurozone waiting room, it would be even more motivated to face these socio-economic challenges. Moreover, no one can say how long Bulgaria would have to wait for the actual introduction of the euro. Secondly, the moment of Bulgaria's application coincides with changes at the top in the ECB. Most likely, the bank will be headed by French Christine Lagarde and Bulgaria's application is unlikely to be her first task in office.

Ambiguities are more than known and predictable developments on the path of Bulgaria to the Eurozone. This does not prevent the country from taking the necessary and required European measures. This is seen in the results of the European stress tests of Bulgarian banks, which are encouraging and motivating.

English: Alexander Markov