(C) Banks' bailouts !?!

Nationalization is an extreme approach to solve any business crisis, which always, always brings the burden of the irrational political influence over the nationalized business. Seeing the banks’ nationalization a counter-measure of the crisis, tough, is a pretty dangerous point of view, contrary to any market principles. On one side, in functioning market economies, only the strongest and the fittest survive. On the other side, the nationalization preserves the infirm businesses, which is in no ones favor.

Have we already forgotten the filthy service at the dusty bank kiosks with max of 15 minutes clients’ service time a day?

We need to admit that there is a multitude of sins of the Bulgarian banking system. However, if a significant problem exists it is the job of the regulator to allocate and eliminate it, thus improve the business environment. This effect would not be achieved by a brutal, nation-wide government intervention, but through thorough, adequate and timely control. It has been the last 3-4 years that the banks managed to evade the recommendations and the restrictions of the central bank, especially in the credit expansion field, through some fancy instruments and by utilizing SPVs designated for balance-sheet clean up of high risk exposures. This has led to a build up of risks in the banking system, in particular the concentration, the operational and the liquidity risks. The symptoms of these problems have shown up recently, due to the diseases of the mother banks of the CEE subsidiaries’ banks. This financial plague will give chance of survival of the healthiest ones.

Besides all said above, we need to answer one more question, before we dare to raise the nationalization question: What resources, if not newly-issued foreign debt, could the government offer to support, leave alone nationalize the banking system?

Currently the Bulgarian government and the Bulgarian national bank can afford to bailout one or two at best, of the largest banks. Shall one dream of nationalizing the banking system, one should issue tens of billions of foreign debt, which will be burden for plenty of generations. Even worse, we will exchange a kind of long-term equity investment into a shorter debt, but for all the Bulgarians. I see no drop of rationality in this hypothesis, even further; I believe that any non-fundamentally-based negative comment or remark is a dangerous flirt with the stability of the banking system and the Bulgarian economy.