The latest central bank figures show that the Bulgarian deposit market has used up its capacity to provide liquidity for local lenders in the grip of the recessionary economy, "Dnevnik" reports.

Deposits attracted from individuals between July and September surged by 641.6 million leva, or 2.8 per cent, compared with 1.3 billion leva, or 6.2 per cent, this time last year.

The downtrend was confirmed by bankers.

UniCredit Bulbank chief executive Levon Hampartzoumian said the growth opportunities (which is that part of incomes which people are ready to deposit) are limited and have already been exhausted this year.

Competition between financial institutions picked up in mid-2008, when funding from their foreign parents dried up and international markets were practically locked up for resources, the story says. The all-out battle for customers' savings continued into the first months of this year but rates have hardly moved any higher in the first nine months. As a result, banks are inundated with resources that could prompt them to ease up the credit that is now only seeping through.

Bankers believe they already have a wider range of options for attracting resources from abroad, including parent companies and international financial institutions such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). This will be enough to meet the slackened demand for credit at the moment, said Petar Andronov, CEO of Cibank, the local banking unit of the Belgian KNC.

Bankers predicted that stale demand for funding will force them to cut back interest rate on deposits to offset the high interest paid on their own borrowings.

The turnaround will be slow but help spur on economic activity, according to experts.

Source: BTA