Foreign Banks in Bulgaria, 1875-2002

Adrian E. Tschoegl, Wharton School of the University of Pennsylvania
Kenneth Koford, Deceased

Abstract

We apply the analogy from biology of ecological succession that follows natural disasters as a conceptual framework for the history of foreign banks in Bulgaria. We argue that the current predominance of foreign banks is unlikely to be permanent, even without government action. The argument should also apply to other countries that have incurred sever financial collapse. In the case of Bulgaria, foreign banks have entered several times—before World War I, after that war, and after the fall of Communism in the early 1990s. The same source countries and even some of the same banks that were present before World War II or even World War I, reappear in the 1990s. Government concern with retaining control over credit limited the foreigners’ role in the banking system. However, since 1997 the government has privatized almost all the major banks with the result that foreign banks now control almost 90 per cent of the banking system’s assets.