The focus of this chapter is the historical development of the banking system of the Republic of Bulgaria following political transformation in 1989. As the country transitioned from a command economy to a market-based economy, it experienced bouts of stability and crises which included bank panics and skyrocketing inflation. Much of this is directly linked to stabilization policies that entailed the privatization and foreign ownership of banks, and resulted in the deepening of financial intermediation. Nevertheless, the share of bank assets in gross domestic product remains relatively modest by international, and even Central and Eastern Europe, standards. This chapter notes several crucial points of inflection and considers the potential for change using quantitative and qualitative tools of analyses.
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