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Determinants of Stability of the Banking Sector in Bulgaria Against the Backdrop of Covid

Author

Listed:
  • Irina Kazandzhieva-Yordanova

    (University of National and World Economy, Sofia, Bulgaria)

  • Zlatin Sarastov

    (University of National and World Economy, Sofia, Bulgaria)

Abstract

The aim of the paper is to investigate the determinants of stability of the bank system in Bulgaria and examine their relevance during the pre-Covid, Covid and post-Covid period. The key determinants for stability are identified. The relevant data used in the study is sourced from the publicly available releases of bank indicators by the supervision authority and regulator. The published data is aggregate for the whole banking sector and applies for both the independent and dependent variables in the specified regression model. Relevant research texts for stability determinants and COVID impact are studied and their findings applied to the banking sector in Bulgaria. A multiple regression model was devised and applied with the capital adequacy ratio selected as the dependent variable, whilst the independent variables being the major internal financial ratios. While the study finds significant effects of COVID-19 on key bank performance indicators, used as either independent or dependent variables in the model, the overall impact on the bank sector stability is assessed as neutral due to the interplay of strong capital buffers, the conservatism of Bulgarian banking sector due to the lack of lender of last resort and the implementation of macroprudential measures in the years before the pandemic.

Suggested Citation

  • Irina Kazandzhieva-Yordanova & Zlatin Sarastov, 2026. "Determinants of Stability of the Banking Sector in Bulgaria Against the Backdrop of Covid," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 286-311, March.
    • Handle: RePEc:nwe:eajour:y:2026:i:1:p:286-311
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    References listed on IDEAS

    as
    1. Cao, Yifei & Chou, Jen-Yu, 2022. "Bank resilience over the COVID-19 crisis: The role of regulatory capital," Finance Research Letters, Elsevier, vol. 48(C).
    2. Demirgüç-Kunt, Asli & Pedraza, Alvaro & Ruiz-Ortega, Claudia, 2021. "Banking sector performance during the COVID-19 crisis," Journal of Banking & Finance, Elsevier, vol. 133(C).
    3. Shabir, Mohsin & Jiang, Ping & Wang, Wenhao & Işık, Özcan, 2023. "COVID-19 pandemic impact on banking sector: A cross-country analysis," Journal of Multinational Financial Management, Elsevier, vol. 67(C).
    4. Freixas, Xavier & Laeven, Luc & Peydró, José-Luis, 2015. "Systemic Risk, Crises, and Macroprudential Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262028697, December.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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