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.
This competition can be launched across national frontiers. In the meantime, existing players are faced with the problem of what they do with the branch networks they have so painstakingly built up over the years. Unless they can give the right incentives to existing customers to migrate to the new electronic delivery channels, and scale back their branch networks accordingly, the promised cost-savings from the internet may not be realised. Moreover, one of the key distinguishing characteristics of the internet is the ability which it gives customers to access and compare the offers of many different retailers, including banks. This greatly increases the power to “shop around”. This will increasingly be done with the help of automatic shopping agents that will travel the net looking for the best deal on behalf of customers or through the use of intermediaries who will offer consolidated product information and price quotes. This will drive down margins, particularly on commodity-type products, and erode customer loyalty. As has often been said, the Internet Age is all about customer empowerment. What in this situation is a traditional bank to do? Is it simply a matter of waiting to be overtaken by a trendy new virtual bank with a catchy name? Luckily, for the existing players it is not as simple as that. Banking is not simply about cheap delivery, although that will become more and more important.