Current situation of Bulgarian banking sector and its place in the economy

Generally, financial intermediation in Eastern Europe is very low. Banks are the main financial intermediary institution in Bulgaria, due to the fact that non-banks are still weak plus that the capital market is also underdeveloped. Banking is the dominant sector in Bulgarian financial market with some 35 commercial banks and total assets of about 14bln BGN as of September 2002 (BNB est.); next there is small but growing insurance sector and underdeveloped stock exchange (trading only small number of shares), some undersized pension funds and several finance houses. This leads to the financials sector inability to provide the capital necessarily for businesses to develop. Reason for this is the perception of high risk in the financial market. The root for this problem lies in the fact that the Bulgarian financial market is still recovering from almost half a decade of bank mismanagement and the severe economic crisis in 1996-1997, when the banking sector experienced one of the worldâ€

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