WASHINGTON, March 18, 2016 – The World Bank Board of Executive Directors approved today a EUR 300 million financing for the Bulgaria Deposit Insurance Strengthening Project. The project aims at strengthening the financial and institutional capacity of the Bulgarian Deposit Insurance Fund (BDIF) - a public legal entity in charge of protecting insured deposits and participating in the preservation of financial stability.
The World Bank support will help rebuild BDIF’s reserves in the aftermath of the fourth largest commercial bank failure in 2014. Payout of insured deposits put a strain on BDIF’s financial capacity and required liquidity support from the state budget. While the project is expected to alleviate pressure on the state budget, it will also help maintain confidence in Bulgaria’s banking system as a whole.
Anticipated outcomes of the project include a strengthened funding structure and increased level of the BDIF reserves. As a result, the Deposit Insurance Fund will increase its financial independence and sustainability enabling it to successfully implement its legal obligations.
“Putting BDIF on a solid financial footing will have a positive impact on maintaining the confidence of depositors and will make the banking system more resilient to possible shocks,” said Tony Thompson, World Bank Country Manager for Bulgaria, the Czech Republic, and Slovakia. “This will encourage a steady increase in the amount of domestic savings that can be mobilized for productive uses, which, in turn, can lead to increased growth and job creation,” he concluded.
This project is the first World Bank lending operation approved for Bulgaria since 2009. It has been prepared in anticipation of the new Country Partnership Framework for Bulgaria.
The project approved today is financed from a loan with a 10.5 year maturity, including a 6-year grace period.