Ivan Iskrov: Global and regional challenges to the economy and the financial system. Do we have working solutions? Opening address by Mr Ivan Iskrov, Governor of the Bulgarian National Bank, before the International Scientific Forum “Global and Regional Challenges to the Economy and the Financial System: Do We Have Working Solutions?” organised by the VUZF University, Sofia, 10 May 2012. *  *  *  Dear Mr. Rector, Dear Participants and guests of the conference, Ladies and gentlemen, It is an honour and a pleasure for me to take part in the opening of this International Scientific Forum organized by the VUZF University. I would like to thank its Rector, Prof. Vazov for inviting me, and through him to congratulate the University on the occasion of its remarkable 10th Anniversary. The academia are famous for their conservatism but here, only a decade after its foundation, your University established itself as one of the leading universities in Bulgaria in the area of finance and insurance. An example of the high European standards to which the VUZF University aspires, are the joint bachelor’s and master’s degree programmes with the University of Sheffield. In addition, the Extended “Erasmus” University Charter awarded by the European Commission provides opportunities to VUZF University students to train and have internships at EU universities and companies. It was announced lately that in the recent five years 55 thousand people have graduated economy in Bulgaria.
For instance, focusing solely on ‘bad’ loans may be misleading if it is not accompanied by the clarification that the assets in the banking system balance sheet are very little exposed to the risk of mark-to-market revaluations (and exactly the manifestation of that risk became the biggest problem in many of the “advanced” banking systems). Furthermore, it is very common in Bulgaria to comment on the gross non-performing (over 90 days past-due) loans ratio, whereas the economically more significant ratio is the “net non-performing (over 90 days past-due) loans/net loans” ratio – it correctly reflects the fact that the risk has already been taken into consideration in the income statement through the impairment costs that banks have actually made. Also, as a rule, net non-performing loans represent the part of the loan portfolio covered by highly liquid (and acceptable under the BNB‘s high standards) collateral. Net non-performing loans in Bulgaria hold a share of 10.71% at end-March 2012. What I mean to say is that the analyses and conclusions about non-performing loans across countries are useful only when they are based on comparable values. Despite the objective indicators, all the resilience and adaptability of the economy and banking system in Bulgaria remain unnoticed by many international observers and the leading world media. Even the analyses made by European and international organisations, known for their high expertise, still lack understanding of the economic specifics in the different countries.