31.05.2021 Over BGN 5.6 billion for 18,500 micro, small and medium-sized enterprises of the BDB Group for the past 11 years
Since 2009, when it was transformed into a development bank, the BDB Group has supported 18,500 Bulgarian companies. Of these, more than BGN 2.6 billion have been granted in the form of loans or other financial support to 6,500 small and medium-sized enterprises. This means that on average about 590 companies a year were supported by the state bank. More than 12,000 other companies have received loan guarantees worth over BGN 3 billion.
Profit of the company
BDB is a self-sufficient business company, which does not work with funds from the state budget and is not a budget enterprise. Unlike most national development banks, BDB does not use a full state guarantee (including a guarantee for its liabilities).
The Bank operates in accordance with the Bulgarian Development Bank Act and the Credit Institutions Act. For the period from 2009 to the beginning of the COVID crisis in 2020, it made an annual profit. Its total amount is BGN 229 million after taxes, with 30% returned by the Bank back to the budget in the form of a dividend. In the 2009/2019 period, the capital of BDB was not increased, with the Bank self-financing its activities in full using own capital (BGN 752 million on 31 March 2020) and credit facilities obtained from foreign financial institutions.
Since its establishment as an Encouragement Bank in 1999, the Bulgarian state has increased the Bank's capital three times for a specific purpose: in 2008 – by BGN 500 million, as a measure of the government of Sergei Stanishev to deal with the consequences of the global economic crisis; twice in 2020 - by BGN 700 million, as a measure of the government of Boyko Borissov for the creation of guarantee programs to support individuals and entities affected by COVID-19, and by BGN 140 million for the purchase of an issue of shares, a necessary condition for Bulgaria to join the ERM2 exchange rate mechanism and the Banking Union.
Negative effect of the COVID-19 crisis
Towards the end of May this year, the approved loans for individuals affected by COVID-19 were a total of 48,865 in the amount of BGN 230.18 million. Under the business support program, BDB has confirmed 1,729 loans оf over BGN 254.5 million. Thus, the approved funds under the two programs are a total of BGN 484,858,156 or 69.27% of the resource provided by the state. The capital increase by the state by BGN 700 million is for taking guarantees to the commercial banks, which finance the Bulgarian individuals and companies affected by the COVID crisis. Under these guarantees, BDB is expecting losses as of 2020 – the year when the programs commence. According to the International Financial Reporting Standards, the first losses were reported in 2020, which were the reason why the Bank made a loss for the first time in 12 years. The maximum expected losses are equal to the capital contributed by the state through increase. This is the reason why this capital cannot be used for any type of credit activity other than under the guarantee programs to support the individuals and entities affected by of the pandemic.
Audit and monitoring
BDB is a systemically important banking institution and is monitored according to the highest auditing standards by two independent auditors. Until 2018, these were the auditing companies Ernst & Young and Zaharinova Nexia, and since 2019 they have been Deloitte and Grant Thornton. The audit reports are part of the annual financial statements. They are public and are published on the official website of the Bank.
BDB is an entity supervised by the Bulgarian National Bank, which does such supervision through both on-site inspections and remotely. Inspection reports are not public. BDB's international creditors also conduct their own regular audits of the Bank's position.
The important role of development banks
In almost all EU Member States, there are national financial institutions with a key role in implementing initiatives and programs that are not of interest to the private sector. Moreover, the tendency is for countries that have not yet had national development banks to set up such institutions. By law and statute, the resource of the Bulgarian Development Bank is useful and needed not only in supporting small and medium-sized enterprises, but also in a number of areas where there is not enough market interest from private financial institutions, such as energy efficiency, infrastructure, regional development, export, etc.