LM Legal Services Blog

According to a research carried out by Sega daily newspaper, some Bulgarian banks continue to charge a penalty fee in the cases of early repayment of customers’ loans, although the amendments to the Law for the Customer Loan have come into effect from 5 January 2009. According to the amendments, banks should not collect a penalty fee if loans ranging from 400 to 40 000 levs are repaid before the maturity date.

According to First Investment Bank, they still collect penalty fee because it is not clear if the amendment will affect old loans or will be valid only for new loans. UniCredit, UBB and Piraeus Bank said that they still did not have internal instructions and at the moment they collect the penalty clause as per the contracts signed with their clients. Allianz Bank declared that they continue to charge a penalty fee of 5% of the total amount if the customer pays in one go less than 6 instalments but if they pay more instalments at once, there is no penalty fee.

The number of the customer loans in Bulgaria has not decreased, only the requirements of the banks have become more strict, according to the statistic of the Bulgarian National Bank. The total amount of the bank loans in September was 48.15 billion levs which is an annual increase of 17.55 billion levs or 47.8%. in October the number of the customer loans continued to grow and it has reached 48.9 billion levs, and increase of 750 million levs in one month. The ratio of the customer loans in the bank assets have been constantly increasing and have reahced 71.24% in October 2008.

Between September 2007 and September 2008 the company loans have increased faster than the individual customer loans. The companies have received more than 10 billion levs in loans while the individual customers 5.1 billion levs.

However, it is worrying that the size of the loans exceeds the deposits of individuals and companies – in October they have reached 118.97% of the deposits.
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The maximal new foreign debt of Bulgaria in 2009 will be increased by 25% or 2.5 billion levs (about 1.2 billion Euros) according to the decision of the parliamentary budget and finance committee. The council of Ministers will not make any changes in the credit framework during the year as the loans and the beneficiaries have been already chosen. The largest loan is of 600 million Euros and it is for the construction of the nuclear power station Belene.

More than 97 Bulgarians have drawn loans exceeding 1 million Bulgarian levs, they owe 153.1 million levs to the banks, or in other terms, on average each one of them owes 1.56 million levs. Generally, the individual borrowing in the country has increased, according to the Bulgarian National Bank. The average personal loan is 5841.42 levs, which is an increase of 1139 levs in comparison to 2007. The size of the most of the personal loans does not exceed 10 000 levs. 2.46 million personal loans totaling 4.71 billion levs have been lent. Although these are as much as 88.4% of all loans, in terms of money, they are only 29% of the total amount of the loans measured in levs. The concentration of the credits is between 10 000 and 250 000 levs. In this price bracket the number of the loans is 320 000 but their volume in levs is 10.43 billion which is 64.1% of the total amount of all personal loans. The tendency shows that within a few years time the amount of the personal loans will exceed the company loans in Bulgarian.

The Bulgarian banks have lent a record number of loans to businesses from April to July. This level of lending, amounting of 3,2 billion levs, have surprised the experts as it takes place in the midst of a world economic recession. The greatest number of loans to the value of 975 million levs, have been given to traders, while at the same time, there is a decrease in the number of the loans for construction projects and for tourism. Even if the lending decreases in the remaining months of the year, still it will exceed last year’s levels, the experts say.