EFFECTS OF THE BULGARIAN BANKING SECTOR JOINING THE EUROPEAN BANKING UNION

Abstract

The development of the Bulgarian banking system is a complex and dynamic process that is driven by the effect of both internal and external factors. The country’s membership in the EU favours inflow of foreign capital into the system in the form of the purchases of most Bulgarian commercial banks. The domination of European capital forms a number of positives but also possibilities for distress by line of ownership. As a Member State of the EU with derogation, Bulgaria does not participate in the European Monetary Union. However, apart from the choice of the euro as a nominal anchor of the Currency Board, it can also be observed that there is tighter integration with the European financial system and, over the last few years, government declarations expressing the desire to become a full member of the Eurozone. That leads to commitments that demonstrate the viewpoint that it is possible to achieve significant improvements of the main dimensions of the system’s functionality while also increasing its credibility in the eyes of Bulgarian consumers of bank services and European investors. In 2014, the Bulgarian bank system faced a serious challenge – the crisis surrounds Corporate Commercial Bank (CCB), one of its biggest commercial banks. The goal of this article is to examine the methods, effectiveness and costs of stabilizing the system. At the same time, the authors also examine the approaches that would have been applicable to the same situation had the country been a member of the European Banking Union and had CCB been under the Single Supervisory Mechanism. The task, based on the above-mentioned case, to evaluate the positives and potential negatives of Bulgaria joining the Banking Union and to support membership in the European Banking Union. That would contribute towards additional stabilization of the Bulgarian banking sector and more effective resolution of capital adequacy issues, liquidity, solvency and security.