The volume of loans over BGN 1 million decreased by 46.9% in just one month, according to the latest figures from the Bulgarian National Bank (BNB) at the end of September. At the end of the ninth month of the year, their amount amounted to BGN 385.8 million. And in August their amount was BGN 727 million.
It is important to note that these numbers refer to the volumes of new credit production, other than overdrafts, of companies resident in euro. The new business consists of new loan agreements for the banking system concluded in a given calendar month, as well as loans renegotiated in the same period (including refinancing loans). In this sense, changes in the volume of new business may be due to cyclical factors, incidental events, as well as trends.
“Usually in the months of July and August the economic activity related to the negotiation and renegotiation of loans to non-financial companies is higher than that of September”, BNB experts explain to money.bg.
The Central Bank indicated that in August 2022 various loans for a significant amount were concluded, which can be defined as events of an ancillary nature and one-off effect.
Interest rates on business loans have risen sharply
As money.bg wrote, referring to BNB data, in September there was a sharp increase in interest rates for all types, reported by the statistics of our Central Bank, business loans.
“In September 2022, the average interest rate on loans up to EUR 1 million agreed in BGN will increase by 0.17 percentage points to 3.04%, and on those above EUR 1 million – by 0.28 percentage points at 2.50%. The average interest rate on loans of up to 1 million euros taken out in euros increased by 0.83 percentage points to 3.49% and on loans above 1 million euros – by 1.07 points percentages to 3.14% in September 2022 the average interest rate on overdrafts in BGN increased by 0.07 percentage points to 2.40% and on overdrafts in euro – from 0.32 percentage points to 2.25% “, the BNB said in the announcement.
The effect of the European Central Bank’s interest rate increase policy is clearly expressed by comparing the data on the growth of interest rates on business loans in BGN and in Euro. It can be noted that for BGN loans the growth is weaker than for those in euros, where on a monthly basis for euro loans up to 1 million euros the growth of the interest rate of 0.83 percentage points to 3.49% is form on an interest increase of 31%, and for Europrestiti over EUR 1 million of interest rate growth from 1.07 BC to 3.14% constitutes an increase of almost 35% in the interest rate.
In the case of BGN business loans, these increases are many times smaller, 6% and nearly 13% respectively. The reason is that in the case of business loans there is no legal regulation in the formation of interest and this allows banks to quickly pass on changes in interest rates on business loans. This happens even faster when the loans are not in lev, but in euros, because linking the interest on them to the European interbank interest rate (EURIBOR) leads to the transfer of the ECB’s interest policy to these loans almost automatically (with a delay until the next payment of the interest rate).
