Saturday, September 15, 2007

Wednesday, September 12, 2007

EU told to accept 20m migrant workers

From the FT this morning:

EU told to accept 20m migrant workers

Europe must relax its immigration controls and open the door to an extra 20m workers during the next two decades, the European Union’s justice chief will say on Friday.

Franco Frattini, justice commissioner, is to tell the bloc’s immigration ministers in Lisbon that the EU should stop erecting barriers and instead build safe pathways for Africans and Asians who risk their lives heading to the continent to find a job.

“We have to look at immigration not as a threat but – when well-well-managed, and that is our new task – as an enrichment and as an inescapable phenomenon of today’s world,” he will say.

“Europe has to compete against Australia, Canada, the USA and the rising powers in Asia.” He will suggest the word immigration and its “dark side” should be dropped in favour of “mobility”.

While 85 per cent of unskilled labour goes to the EU and only five per cent to the US, some 55 per cent of skilled labour goes to the USA and only five per cent to the EU.

The Italian wants to reverse those figures by means of harmonised policies to allow in millions of extra workers of all abilities.

“All skill levels are required. The challenge is to attract the workers needed to fill specific gaps,” he will say. That runs counter to attempts by countries such as Britain to restrict access to prized skilled workers.

Germany, Italy and Hungary, with their ageing populations, are most in need of immigrants, he will say.

Next month Mr Frattini is to propose an EU “blue card” to compete with the US green card. Skilled workers could apply for two-year residency that could be extended. After five consecutive years living in any number of EU countries they would be allowed to stay permanently.

He is to table a law laying out minimum working standards for unskilled migrants and forming a one-stop shop for them to apply for work permits.

The Commission is about to establish a €10m information centre for Mali. Locals will be able to apply for jobs in Spain and France through a deal signed between the countries. It will be the first of several such centres in Africa.

Mr Frattini is aware of the sensitivities of national governments, who will have to back his reforms.

The reforms could lead to a more than doubling of the EU’s foreign-born population by 2030. So he will also stress the importance of finding jobs for indigenous workers and cracking down on illegal immigration.

Wednesday, September 5, 2007

Central Banks and Credit Crunch

From the FT this morning:

Central banks seek to quell credit crisis

By Gillian Tett in London, Ralph Atkins in Frankfurt, Krishna Guha and Eoin Callan in Washington and Michael Mackenzie in New York

Published: September 5 2007 20:49 | Last updated: September 5 2007 20:49

Central bankers in Europe on Wednesday intensified efforts to quell the turmoil in global money markets as evidence emerged that tighter borrowing conditions might be denting parts of the US economy.

Demand for homes in the US fell to a six-year low in July, according to figures released by the National Association of Realtors. Economists had expected pending home sales to fall 2 per cent, but instead they dropped 12.2 per cent in the month.

Meanwhile, the US Federal Reserve beige book survey of economic conditions showed that most regions of the US saw “tighter lending standards for residential mortgages”, which the report said were having a “noticeable effect on housing activity.”

Several regions also reported that the tightening of credit conditions had spilled over into residential real estate. But the beige book said that outside real estate there were only “limited” reports of market turmoil affecting the economy.

The pressure on housing will probably reinforce the belief among top Fed officials that it may have to cut interest rates on September 18.

But the lack of evidence of spillovers outside real estate – and the fact that almost every region reported “at least modest increases in employment” over the period – which ended August 27 – highlights the difficulty of this decision.

Concern over the economic damage from money market pressures shook equities. At midday in the US, the S&P 500 index was down 1.4 per cent at 1,469.08. Earlier, the FTSE Eurofirst 300 index had closed 1.7 per cent down while the FTSE 100 retreated 1.7 per cent in the UK.

The falls came as the Organisation for Economic Co-operation and Development warned of the US economy being likely to face a “quite significant” slow­down this year because of the subprime crisis, and said it could warrant an early interest rate cut.

Home builders met Ben Bernanke, the Fed chairman, to discuss the problems facing their industry.

Money markets also suffered another day of mounting pressure that saw the Bank of England abandon its “business-as-usual” stance towards commercial banks and announce its willingness to offer more cash to banks in its regular monthly money markets operations.

This move, which could result in an additional £4.4bn (€6.51bn) worth of funds being placed in the markets next week, is intended to encourage banks to start lending more freely to each other.

Separately, the European Central Bank announced it was ready to conduct a fresh round of liquidity-boosting operations today if volatility in the euro money market continued to rise. “Should this persist . . . the ECB stands ready to contribute to orderly conditions in the euro money market,” it said, shortly before the ECB and Bank of England each convened their regular committees to discuss monetary policy.

The British Bankers Association welcomed the Bank’s move, saying it brought “better liquidity to the market.”

Yet, private sector bankers in London suggested the Bank’s actions were far too timid, given the paralysis in money markets. Although the Bank said it hoped to reduce the rate of borrowing in overnight sterling markets, it ruled out acting in the three-month money markets.

The Bank’s actions helped lower the overnight sterling borrowing rate to 5.90625 per cent, from 6.11 per cent on Tuesday. The three-month money rate rose to 6.8 per cent – a nine-year high – as banks hoarded cash because of fears they would face liquidity calls in the next few days.

In the euro-denominated markets, overnight and three-month money rates also rose. In the US, three-month money was trading at 5.72 per cent, an abnormally high level.

The pressure on central banks to alleviate the funding squeeze is being fuelled by signs that the financial problems may now be contributing to new stress in the real economy.

“The data is a less than gentle reminder that the current crisis is more than a financial sector phenomena but already has a strong real economy component,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

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Eastern Europe faces generation crisis

From the BBJ this morning:

Eastern Europe faces generation crisis

31 Aug 2007

Just as the governments of Eastern Europe are grappling with the labor shortage caused by young, educated and skilled citizens moving West for higher wages, economists are warning of an even more serious crisis looming: The average age of those left behind is going up, and fewer are working- reports International Herald Tribune.

The two trends are bumping up against each other in a way that will pose immense challenges, economists say. The labor shortage will make it hard to sustain the high economic growth levels of recent years, but without such growth, cash-strapped governments will be hard-pressed to pay for the demands of an aging population - especially with fewer and fewer people contributing to the pension and health systems. “Eastern Europe, along with the former Soviet Union, will by 2025 have populations that are among the oldest in the world,” said Arup Banerji, human development economics manager at the World Bank. “The heart of the matter is this combination of the skilled labor shortage and the demographic trends.”

The aging population, shrinking tax base and falling birth rates in Eastern Europe mirror what has been taking place in Western Europe, but with some big differences. “We are poorer,” said Mateusz Walewski, labor expert at the Center for Social and Economic Research in Warsaw. "And our institutions are not prepared to deal with these trends, because in some ways the transition to a fully mature market economy has not been completed." The “negative impact” is already being felt, he said. Wages, for example, are rising, which can be a double-edged sword. Low wages have traditionally given the region a big competitive advantage over Western Europe, enticing foreign companies to invest heavily in Poland, Slovakia and the Czech Republic. But they have also encouraged young people to leave for higher-earning jobs in western countries. Walewski estimates that during the second quarter of this year, wages for skilled labor rose by 10% compared with the same period last year.

“If the wages increase and if the labor shortage persists, then foreign companies may well focus on capital-intensive projects, with high technology demanding less-skilled labor,” said Simon Commander, labor economist at the European Bank for Reconstruction and Development (EBRD) in London. “On the other hand, high wages just might attract back some of the young people who left or may be enough to attract people back into employment,” he said. “It is too early to judge.” In the meantime, populations are aging and shrinking.
By 2025, between one-fifth and one-quarter of the population in Eastern Europe will be 65 and older, according to a World Bank report on demographic trends in the region. The average Slovene will be 47 years old, among the oldest national averages in the world. Between 2000 and 2025, the share of the population over 65 will grow by more than 60% in the Czech Republic, Poland, Slovakia and Slovenia.

Stepan Cernousek, of the Czech Labor Ministry, said the country’s labor market will lack 400,000 workers by 2030 because of the decline in the population. The number of people in the prime working ages of 15 to 64 in Hungary will shrink by 600,000, the equivalent of 3% of the labor force, according to the World Bank. Several East European countries, including Poland and the Czech Republic, have started to recruit skilled labor from Ukraine, Belarus and Kazakhstan to fill part of the gap. But economists are skeptical that this will resolve their deep institutional and demographic problems. “If you take into account the persistence of the skilled labor shortage combined with the falling population, it will be difficult to maintain the high rates of economic growth even with some recruitment from outside,” said Peter Havlik, deputy director of the Vienna Institute for International Economic Studies. On average, the economies across Eastern and Central Europe have been growing at between 5.5% and 6.6% since 2006.

The big challenge facing these countries is how to get more people back into the labor force so that more can contribute to the pension and health systems. Eastern Europe’s employment rate of about 50% compares with 60% in Western Europe and 70% in North America, Commander said. “There is a large nonparticipatory unemployed labor force,” he said. “Think of what that means for state-run pension and health schemes.”

Economists say the low rate is due to the rapid shift away from agriculture after the collapse of the communist systems in 1989. In some areas in eastern Poland, where unemployment is well over 20%, Commander said people have stopped looking for jobs. With such low employment rates, the World Bank estimates that less than 40% of the population in Eastern Europe pay into the pension plans. “To cope with the aging population, it could mean higher taxes,” said Banerji. “The spending on pensions will increase, as will the cost of health care because of the rising costs for drugs.” Despite these problems, the region has been slow to come up with long-term strategies. “The governments are not dealing with the labor or demographic issues in any systematic manner,” said Walewski.

The EBRD says the governments could introduce several programs, particularly retraining and vocational programs. “The vocational training is very poor,” said Commander. The World Bank was more critical. “There is so little retraining of adults over 18 years of age,” said Banerji. “Adult participation in training is 5% at the most in Poland, less than 2% in Bulgaria and in some places nonexistent, while in Western Europe it is 11%. With economies becoming more complex, without lifelong learning, productivity will not increase in these countries.” The labor markets could also become more flexible by reducing the red-tape in setting up businesses and reducing the social security payroll. Other measures include increasing the retirement age from 60 for men to at least 65. “These are all manageable reforms,” said Banerji. “What is needed is the political will to act now and not postpone the future problems.”

Monday, September 3, 2007

Hungary 2007 GDP growth to be slower than expected

From Portfolio Hungary:

Hungary 2007 GDP growth to be slower than expected - GKI
Monday, September 3, 2007 12:56:00 PM

Hungary's economy will grow at a smaller rate in 2007 than previously thought, while the rise of gross wages and inflation will be faster than expected. The latter two will increase budget revenues, thus - also taking into consideration slower GDP growth - will reduce the deficit, economic think tank GKI said in a forecast elaborated in co-operation with Erste Bank and published on Monday.

Hungary's inflation already reached its peak (in March) and is expected to drop considerably from September onward. Agricultural producer prices, however - due partly to bad crop caused by unfavourable weather and growing world market demand triggered by swiftly rising consumption in Asia - are hindering this process. Therefore, Hungary's consumer prices are expected to rise 7.5% on average in 2007 and 5.5% at year-end yr/yr, the GKI projected. Its respective forecasts a month ago were 7.0% and 4.8%.

Nominal gross wages shot up in June, as consequence of 13th months wages paid out in the public sector already in June, which led to an over 8% rise in gross wages. Wage increase exceeded 10% in the public sector, partly as the result of the whitening of the economy. The researcher expects a real wage decline of over 4% for this year.

Hungary's jobless rate has so far been smaller than last year, but due partly to seasonal effects and a mass layoff among teachers, some rise in the rate of unemployment is expected at the end of the year, the think tank forecasted.

The GKI expects the central bank to cut the base rate to around 7.00% by the end of 2007 from the current 7.75%. It also projects the public sector deficit to come in at around 6.0% of GDP this year, smaller than the gap targeted by the government in the Convergence Programme.

The GKI has reduced its GDP growth forecast for this year to 2.5% from 3.2% a month ago. It now expects investments to grow by 2.0%, against 4.0% projected in the previous estimate. It has also cut back its estimates for construction and retail trade increase to no growth from 3% and 0.5%, respectively.
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Saturday, September 1, 2007

Slowing growth on bank lending in Bulgaria

From the Sofia Echo

Slowing growth on bank lending in Bulgaria
09:00 Mon 06 Aug 2007 - Andrew MacDowall, Oxford Business Group

On July 19, Bulgarian National Bank (BNB) increased the minimum mandatory reserve requirement (MRR) in a move intended to slow lending growth.

The BNB governing council announced that, from September 1 this year, the MRR of banks in Bulgaria would be 12 per cent, up from eight per cent at present. Banks’ MMR is held in the central bank, tied up in non-interest-bearing deposits. Bulgarian businesses and consumers have been enjoying the fruits of an economy registering growth of about six per cent in recent years, and have been taking out more and more loans, helped also by the abolition of credit restrictions and the increasing penetration of banks in the country. Lending growth has been a leading contributor to the country’s large and troubling current account deficit, which is expected to continue to grow this year. Tightening the MRR is one of the tools available to the BNB to slow lending growth. Due to the lev’s currency board, which fixes its rate against the euro, interest rate changes cannot be used as a tool of monetary policy. The currency board has now been in place for 10 years, a significant anniversary lost on neither the supporters of the BNB’s decision, nor its detractors. The board has helped lock in economic stability and helped the banking system become one of the most trusted and respected sectors of the economy, a decade after a banking collapse destroyed confidence in it and set back Bulgaria’s transitional economy. Inflation averaged 233 per cent between 1991 and the introduction of the currency board, compared to 5.7 per cent since. On January 1, as Bulgaria joined the EU, the BNB scrapped credit limits which had previously helped restrain loan growth, but pledged to keep the annual rate of lending growth below 20 per cent. Under IMF advice, the BNB moved to slow lending growth to tackle the current account deficit. The BNB said credit control served to decrease the risk rate in the banking sector. The growth of lending has led the private sector’s indebtedness to banks to rise to 57.5 per cent in mid-2007 from 47.4 per cent at the end of last year, according to the BNB. Banks’ lending to non-financial corporations increased 49.1 per cent in the year to the end of May, to reach a total of $11.69 billion. Meanwhile, mortgage lending grew 77 per cent to $2.95 billion and loans to households and non-profit-making institutions 40 per cent to $7.45 billion in the same period. While reassuring investors that the banking system remained robust, the BNB said it was taking steps to rein risk in a dog-eat-dog environment.

The statement announcing the new reserve requirement said: “Although the indicators of quality of credit portfolios remain good, the fast pace of growth of bank lending leads to the accumulation of higher credit risk in the banking system. On the one hand, the risk rate in the banking system increases, on the other, the strong competition and struggle for market share lead to loosening of credit standards and decreasing of interest rates on loans”.

BNB said that real interest rates on household and corporate lending were close to or even below zero, and that while interest rates in Bulgaria had been following a downward trend due to disinflation and competition, the overall global trend on rates is upwards.

The bank warned that this situation “creates unrealistic expectations with the borrower and results in underestimating the risks they take”, particularly as Bulgaria does not have a practice of lending at fixed rates, and that therefore at some point, the higher global rates will feed into those in Bulgaria.

BNB reminded commercial banks that the “highly conservative” supervisory framework allows it to impose restrictive measures on an individual basis, and that the tightening of the MRR could be followed by “additional measures to achieve a moderate bank credit growth and stable development of the banking system”.

Levon Hampartzoumian, the chairperson of the Bulgarian Association of Commercial Banks, told local press that the BNB’s move would increase the interest rates on consumer debts. Others were unimpressed with the central bank’s decision, with one news agency carrying the headline “Does BNB know what it’s doing?”

The report criticised the decision to increase banks’ non-interest bearing deposits as “a tax on deposit base” that could force banks to decrease interest on deposits, discouraging saving. It went on to say that elsewhere in Europe, the MRR is not used as a tool to slow banking growth. It said that larger foreign-owned banks would be able to find other sources of liquidity, while smaller banks would suffer. Banks might even increase credit in order to compensate for the MRR, having the opposite effect to that which BNB intended. However, BNB has proved an able and astute guardian of the banking sector, albeit on the foundations of the currency board, for the past 10 years.

As Bulgaria moves steadily towards euro membership, slated for between 2010 and 2012, it is expected to be cautious. Should the MRR increase not have the desired effect, the governing council has shown every intention of acting again, down different avenues, to keep the system and the economy on track.

Bulgaria, Unrestrained Rush of Loans?

From Focus News Agency

The unrestrained rush of loans

1 September 2007 | 05:16 | FOCUS News Agency

Sofia. Banks in Bulgaria have demonstrated a huge financial potential (for our country's size) regarding crediting. The lifting of restrictions on credit growth by the Bulgarian National Bank (BNB) was sufficient to literally flood the market by a wave of newly-advertised loans. Statistical data for June 2007 show that the total volume of banks' receivables from citizens and firms was BGN28.13BN, up BGN5.3BN from the end of last year, and up 8.3BN from their size in June 2006 when they totalled BGN19.82BN. What is specific about that one-year period is that the growth this time was mostly due to corporate loans. According to central bank figures, they rose by BGN6.9MN, from BGN12BN in June 2006 to BGN18.9BN twelve months later. It is interesting that three quarters of these newly extended loans -more than BGN5.2BN -exceed BGN500.000 each. In other words
the expansion in crediting has been mainly directed towards big companies, rather than to small- and medium-size enterprises. Moreover, according to experts, most of the loans are short-term, i.e. for turnover capital.
An annoying fact is the lack of information about how much of the above-mentioned financing was spent for the purchase of inputs and raw materials and how much of the money went for wholesale purchase of household items that are afterwards sold by retailers. Due to the lack of such data no analysis can be made if that crediting directly influences the quickly rising current account deficit.
The lifting of restrictions on the increase of loans in the summer of 2006 gave many banks an opportunity to report an over 100% credit growth for the twelve months from June 2006 till June 2007. Within that period, for instance, INVESTBANK registered a 136.4% increase of the size of extended loans - from BGN140.7MN to BGN332.6MN. Tokuda Bank reported a 126.8% growth of crediting, Commercial Bank AD - 113%, and Piraeus Bank - 102.9 per cent. The fact which sticks out a mile is that in most cases such steep increases of receivables from citizens and firms are characteristic of institutions where loans accounted for less than 50% of their balance sheet volumes.
But there are also exceptions of that rule, characterizing bigger credit institutions which have already made everything possible to increase their most lucrative assets to the maximum. Such is the case with Piraeus Bank Bulgaria. As a result of the quick growth of the loans released by it, they account for 76.4% of all its assets, while a year earlier they were 64.5 per cent. The same situation can be noticed in Post Bank, which credits rose by 76.81% within the twelve months from June 2006 to June 2007, while their share in the total size of its assets increased from 53.9% to 66.81 per cent.
But UBB is the champion in that respect, having directed 82% of its assets to crediting. It is big Bulgarian banks that could afford to follow such a policy as their equity exceeds BGN300MN and powerful foreign owners are behind them.
In fact, the size of the shareholders' equity is of decisive importance in case a bank tries to attract as its clients firms with big turnovers and gain from providing complex services to them. Such companies need sizable turnover and investment loans, and their amount according to the Law on Credit Institutions,
may not exceed 25% of the shareholders' equity (that is the turnover between the share capital, the reserves, and the current profit) of the bank which extends the loan.
One way or the other banks ureter to deal with firms rather than citizens for several reasons.
Corporate banking provides opportunities to offer more services - managing cash flows, issuance of guarantees, bails and letters of credit, bearing various fees and commissions, which means additional incomes besides the extended credits, as well as trade in bonds. Moreover, firms that receive loans may be required to present various real securities which could be quickly sold if necessary. They include pledged goods, equipment or even an entire enterprise, as well as mortgages of its real estates.
Consumer loans, however, lack any such extras It's true that the interest rate on them is twice higher than on corporate credits, but the latter provide opportunities for more sources of income and are secured by pledges or mortgages. Therefore, they
are preferred by banks, while consumer loans are laid aside. Within a year they grew by almost BGN1.2BN (26%) and totalled BGN5.6BN in end-June 2007. The total volume of unsecured financing extended even by DSK Bank went down from BGN1.7BN in June 2006 to BGN1.2BN in June 2007. As of the beginning of this year a tendency that banks are trying to transform unsecured loans to citizens into mortgage credits can be observed. There are many reasons for that: the lower risk of financing, guaranteed by a mortgaged real estate and its longer term of repayment, which means more and steady proceeds for the bank. The dynamic market of real estates in this country indisputably contributes to the development
of mortgage loans According to analyses of experts from MKB Unionbank, mortgage credits in Bulgaria are already 99,000 in number, amounting to some BGN4.7BN. The average size of a loan, secured by a mortgaged real estate, is almost BGN45.000, and the average real annual percentage of expenses for it is 8.4%, the financial institution's Executive Director Maria Ilieva claims.
Housing credits are practically the most quickly increasing ones in Bulgaria. They rose by almost 81 % within a year. Their repayment could be put at risk if citizens' incomes go down and they are not able to service their liabilities. However, there are no such indications for the time being. Bulgarians possess real estates in excess.
According to a survey, published in the Real Estates magazine, private housing property per capita is 94% in Bulgaria, 84% in Spain, 76% in Greece, 64% in the Czech Republic, and between 36 and 42% in Switzerland and Germany. The average time necessary for the sale of a real estate in Bulgaria is 90 days, while in Germany and Switzerland it is more than 190 days. The real estates market In our country still offers competitive prices as compared to those in most of our neighbours. In Romania, for instance, prices of flats in big resorts, such as Mamaya, Sinaya, Constanca, Costinesti, etc., are in the range of EUR1,100-1,500/sq. m. A square meter of such real estates in Turkey costs about EUR1.000 to EUR1,760. Prices in Greece, Montenegro and Croatia are still higher. In Dubrovnik, for example, there are even purchase deals for houses, sold at EUR4,500/sq. m.
The prices in Sofia are greatly manipulated, on one hand, and differ a lot, depending on the real estate's location and type of construction, on the other hand. The third, but the most important circumstance is that the construction work of a great part of the so costly housing is not of adequate quality. And that means it has been realized cheaply, using bribing practices, and brings huge profits to the investor and sub-contractors. God forbid - but in case of natural disasters such as drought, fires, floods, and earthquakes, such buildings could be ruined to the ground. What would then the price per square meter matter if the real estate has not been insured against such accidents? It's another question that sellers of immovable property are not interested in that. They are glad to get their profits, which are based on their conclusions that demand in cities and summer resorts is equal to supply or even exceeds it. Bank experts have calculated that even if prices go down by a quarter, that would not endanger credit institutions. The reason is that most mortgage loans do not exceed 75% of the market evaluation of the mortgaged real estate they are secured by.
Since 2000 the BANKER weekly has been preparing a quarterly
rating of the most actively crediting banks, evaluating them according to three criteria: total volume of extended loans, share of credits in the balance sheet value, and annual growth of released loans. The institutions which occupy the first ten positions according to all the three indicators are included in the group of the most actively crediting banks. From all that has been said so far it is clear that some of the biggest
credit institutions in this country quite logically enter the newspaper's ranking in end-June 2007, namely United Bulgarian Bank (UBB), Piraeus Bank Bulgaria, and Post Bank. UniCredit Bulbank has not been included in the rating because it was born as a result of the merger between BULBANK, HVB Bank Biochim, and HEBROSBANK, in 2007, but it would not be fair to add up mechanically the three banks' data and compare the results with those of the other credit institutions.
UBB's success is connected with a policy, established some years ago. In a nutshell, it is connected with the balanced development of loans to citizens and firms. This is the only bank in our country where corporate credits - BGN1.7BN, almost equal the released consumer and mortgage loans BGN1.8BN. Another feature is that UBB has always had a huge shareholders' equity. In end-June 2007 it totalled BGN641MN. That allows it to maintain credit growth steadily high -56.8% from June 2006 till June 2007, and a very high ratio between credits and the aggregate amount of assets.
Piraeus Bank Bulgaria has demonstrated an appetite .to enter the group of the top five banks in this country, both by the size of its balance sheet value and the total amount of extended loans. The very fact that within twelve months it increased the volume of extended credits by 102.9% -from BGN903MN to BGN1.81BN, shows that its managers had been following an aggressive policy of extending its market share.
The bank maintains also quite a high ratio between loans and its balance sheet value - 73.8 per cent. The only hindrance to maintaining the growth so far displayed, is its comparatively small shareholders' equity - just BGN114.9MN.
Its unbalanced credit portfolio, in which corporate loans account for almost 80%, could be regarded as a flaw. However, the bank's managers have demonstrated willingness to change that ratio and have been actively offering credit products to citizens for half a year now.
Post Bank's executives have been steadily abiding by their promise that the processes connected with the acquisition of DZI Bank would not adversely affect its market positions. The institution affirmed itself as the fifth one in terms of extended loans, and reported a 76.8% credit growth within twelve months. Its comparatively high equity of BGN283.1 MN allows it to follow an active policy when releasing credits, although they account for 66.8% of its assets.
All in all, the heat on the credit market will continue till the end of 2007, although the measures for restricting credit growth, to be imposed by the BNB as of September, are expected to cool down temperatures. Loans, however, will continue to be the source of highest proceeds for banks and they will be actively competing to attract clients. A problem would arise if the competition between them leads to an increase of the volume of bad credits. Thus, due to the wild race between them, in a certain moment Bulgarian banks could be infected by the virus which has already infected much larger and more powerful American and European credit institutions.