Interest rates on loans likely to decrease, Bulgarian Development Bank chief Yagodin says

Posted by admin on Apr 1, 2012 in Blog | 0 comments

Interest rates on loans will start going down because of the decline in deposit profitability, Bulgarian Development Bank (BDB) chief executive Assen Yagodin said.

His statement to local media, quoted by news agency Focus, came after the bank signed contracts with six commercial banks to launch loan facilities of 100 million leva (about 50 million euro) for small and medium-sized enterprises in Bulgaria.

Yagodin said that the interest rates set by some banks were too high, but this would not be the case for long.

Currently, however banks were abstaining from sharp changes because of fears that a lot of people would transfer their deposits to another financial institution.

Yagodin said that interest rates that were too high would deplete the bank’s profitability.

According to central Bulgarian National Bank data, the proportion of bad and restructured loans is continuing to increase.

Such loans added up to 22.58 per cent of all loans granted to households and businesses in February, overdrafts excluded.

This means that bad loans have gone up by 9.28 billion leva in a month, according to the report.

Yagodin said that interest rates of six per cent on deposits were not reasonable because at present there was no alternative to deposits.

He said that because of the crisis, investments in shares, mutual funds and property had come to a standstill.

Meanwhile, BNB data showed that the cost of consumer loans for new clients had gone down in February.