site.btaCentral Bank Report: Conservative Policy in Risk Management Continues in Jan - June

In the first half of 2022, the Bulgarian National Bank (BNB) continued to pursue a conservative policy in terms of risk management in the investment of gross international reserves, the Central Bank said in a report published on its website Tuesday.

In the second quarter of 2022, some restrictions relating to limits on certain asset classes in connection with the pandemic were relaxed and some of the prohibitions on placing deposits with banks that are counterparties of the BNB have also been lifted.

The carrying amount of gross international reserves at the end of June 2022 amounted to nearly EUR 33.481 billion, which compared to the end of 2021 represents a decrease of more than EUR 1.116 billion, or a decrease of 3.23% as a relative share of the BNB's foreign currency assets.

Exposure to credit risk remained limited, with approximately 69% of foreign currency reserves invested in the highest credit quality assets rated AAA long-term at the end of the first half of 2022. In foreign reserves, the share of securities decreased at the expense of an increase in the share of deposits provided by the BNB, as did the share of investments in the shortest maturity sector (0 to 1 year).

Net asset income in euro is the sum of three components: investment income on gross international reserves denominated in the original currency; income on currency imbalances, and finally, expenses or income on liabilities.

The investment income from the Central Bank’s international reserves was negative at minus EUR 130.28 million, equivalent to a minus 0.48% yield for the period. This result was mainly due to the strongly negative interest rates on deposits with first class foreign banks as well as the negative yield on the high credit quality euro-denominated bonds in which the majority of the BNB's foreign currency reserves are invested.

Income from currency imbalance for the half-year was positive and amounted to EUR 154.81 million, mainly thanks to the change in the market price of monetary gold measured in euro.

The net financial result on liabilities for the first six months of 2022 is positive at EUR 26.04 million, corresponding to a yield of 0.09 per cent for the period.

As a result of these three components, net income from the management of international currency reserves during the reporting period was EUR 50.56