Bulgaria implements EU’s CRD VI directive with important changes for non-EU banks
Key amendments
The draft bill introduces the following significant changes to the existing legislative framework:
- Enhanced independence requirements for the Bulgarian National Bank (BNB);
- Strengthened fit-and-proper standards for management bodies, senior management and key function holders with new ESG requirements;
- New harmonised notification and approval procedures for acquisition or disposal of material holdings;
- Comprehensive ESG risk management obligations, requiring banks to develop plans addressing climate transition and environmental risks; and
- A new regime of periodic penalty payments of up to 5% of daily net turnover for non-compliance with prudential requirements or supervisory decisions.
New regime for third-country branches
CRD VI also introduces a comprehensive prudential framework for third-country branches, which directly impacts non-EU credit institutions in Bulgaria operating on an ad hoc basis (i.e. operating without the establishment of a branch). Under the new rules, non-EU undertakings seeking to provide banking services in Bulgaria (e.g. deposit-taking, lending, and payment services) must establish a branch and obtain prior BNB authorisation.
For the first time, CRD VI introduces a reverse solicitation exemption in the context of banking services, which until now existed under MiFID II only. Other exemptions include interbank and interdealer transactions, and MiFID II investment services. Contracts entered before 11 July 2026 are grandfathered.
Once authorised, third-country branches are classified as class 1 (higher risk) or class 2 (small and non-complex) based on asset size, retail deposit thresholds and the equivalence of the home country’s regulatory framework. Class 1 branches must maintain a higher minimum capital than class 2 branches, and those instruments must be deposited in escrow accounts in Bulgaria. All branches must hold liquid assets covering 30-day outflows.
Conclusion
Once enacted, the amendments represent the most significant overhaul of the Bulgarian banking framework after the introduction in the Euro in Bulgaria in January 2026. Market participants should assess the impact of the proposed amendments on their organisational structures, licensing arrangements and compliance frameworks ahead of the bill’s adoption.
For more information on CRD VI and the Bulgarian banking sector, contact your CMS client partner or the CMS experts who contributed to this article.
Liah Ahababian contributed to the article.
