Undermining the good name of the sector is a no-win strategy as this would limit and make the services offered by banks costlier, which would eventually harm customers and thwart economic growth. In this context, please allow me to also quote the call of the Head of State who, following his meeting with the BNB Governing Council in February, summed up the situation in a fine and very pragmatic way: “The State should continue to work for the good reputation of our banking system, which is a precondition for more favourable lending and is of benefit to people”. Looking ahead now, we need to stress that coping well in these times of crisis so far does not mean that we can afford to be less watchful or less precise in our next steps. This year, too, will be rich in new challenges. Based on the current projections for a recession in the euro area, we expect that the growth rate of the Bulgarian economy would slow down to about 0.7% in 2012, and this would have a direct impact on the potential of banks in Bulgaria to generate incomes from sources of their own. The weak demand for new loans is facing banks with a double challenge. On the one hand, it will be difficult for them to accumulate new buffers from profits; and on the other hand, the existing classified assets will go on putting pressure on the available reserves. While seeking new business opportunities, you should very carefully approach the question of capital planning.
2  BIS central bankers’ speeches  A financial-stability crisis can start when a financial institution is unable to repay funding to the lender at the repayment date, whilst the lender needs the liquidity at that repayment date. Fear of such occurrences happening simultaneously was an important element in the proliferation of the US subprime lending crisis to a global one. Central banks, recognisant of the impediments to markets’ functioning and the threat to the existence of solvent economic actors, utilise payment systems to grant liquidity not only to the market as a whole, but to individual institutions as well. Because of the re-emerging crisis, central banks can still use unconventional or non-standard monetary policy operations or target individual banks for assistance. The latter is however under-utilised by banks, because they avoid incurring a penalty over the market rate, fearing it may stigmatise them in the interbank markets. Talk of “emergency liquidity assistance” or “acting as a lender of last resort” is at present fading into the background because the commercial banks’ liquidity scare is largely, though not exclusively, a symptom of the sovereign debt crisis Nevertheless, risk stems from commercial banks typically holding positions across many participants (the central bank, other banks, brokerages, non-bank businesses and households) and across different payment systems. These positions lead to interdependencies among the real-time gross settlement systems, mainly operated by central banks, and designated-time net settlement systems, mainly operated by commercial banks jointly.