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Bulgarian National Bank introduces a Plan on Reforms and Development of the Banking Supervision in Bulgaria


On 5 October 2015, the Bulgarian National Bank ("BNB") adopted a Plan on Reforms and Development of Banking Supervision in Bulgaria ("Plan"). The Plan was prompted both by the 2014 collapse of the fourth largest bank in Bulgaria and the efforts of the supervisory body to bring its practices in compliance with the 2012 Basel Core Principles for Effective Banking Supervision.

The most important legislative changes on the internal functioning of BNB include:

  • review and adoption of internal rules that better define the banking supervisory activities performed by BNB and bringing them into compliance with the Basel rules;
  • annual internal audits on the performance of banking supervision and quarterly reports summarizing the current status of banking supervision;
  • establishment of a new (i) Off-site Supervision Directorate, and (ii) an Analysis of Market Behaviour-related Risks Division within the Special Supervision Directorate;
  • increase in the number of inspection teams, which will lead to more on-site reviews of banks.

The measures that shall directly affect credit institutions encompass:

  • expanding BNB's supervisory powers to include dismissal of members of management and supervisory bodies, as well as other management personnel;
  • enforcing a requirement for rotation of the bank's auditors and the disclosure of more information on their activity;
  • defining better rules and requirements for internal supervision practices of banks, lending of large loans, agreements with related parties, corporate management;
  • adoption of specific requirements and processes for preparation and approval of bank's restructuring plans;
  • promulgation of rules and procedures for early intervention of BNB in case of a banking crisis.

The first legislative changes initiated by the Plan came in early November 2015.