Financial Crime World

Banca Națională a Bulgariei Grants License to Foreign Bank’s Branch

SOFIA, Bulgaria - The Banca Națională a Bulgariei (BNB), the central bank of Bulgaria, has granted a license to a foreign bank to operate a branch in the country.

Application Requirements

To obtain a banking license, an applicant must file a written application accompanied by a number of documents, including:

  • Certified copies of registration extracts
  • Authorizations for banking business
  • Constitutive documents
  • A business plan outlining activities, organizational structure, annual financial statements, and authorization from the competent supervisory authority in another Member State

Assessment Criteria

The BNB’s assessment includes evaluating:

  • The reputation of the applicant
  • The reputation, knowledge, skills, and experience of the members of the management board and supervisory board who will direct the bank’s activities
  • Compliance with applicable supervisory requirements
  • Potential risks related to money laundering or financing of terrorism

Funding and Liquidity Requirements

The BNB requires financial institutions holding a banking license in Bulgaria to:

  • Adopt funding and liquidity plans
  • Maintain liquid funds to cater for mismatches between cash inflows and outflows
  • Monitor interest rate risk
  • Adjust promptly the maturity structure of assets and liabilities upon changes in market conditions

According to a report by the International Monetary Fund (IMF), the banking system in Bulgaria is primarily deposit-funded, with:

  • 83% of bank liabilities consisting of deposits as of 2017
  • Wholesale funding has been used sparingly since the Great Recession of 2008/9 but could increase its importance given inflation and rising interest rates

Prior Approval Required for Acquisition of Qualified Holding

The BNB requires prior approval for any person or persons acting in concert to acquire shares or voting rights related to shares in a bank licensed in Bulgaria if their shareholding becomes qualified (10% or more) or reaches or exceeds a relevant threshold of:

  • 20%
  • 33%
  • 50% of the total shareholding or voting rights

In instances where the acquisition occurs as a result of circumstances outside of the control of the acquirer, the acquirer must apply for authorization within one month thereafter and suspend the voting rights attached to the shares until approval is granted. The BNB holds preliminary consultations with the competent supervisory authority in another Member State in cases where the applicant is or controls a regulated entity in that other Member State.

Regulatory Capital and Liquidity

Banks operating in Bulgaria are required to maintain regulatory capital and liquidity in accordance with EU regulations, including:

  • The Capital Requirements Regulation (CRR)
  • Key provisions and definitions regarding liquidity coverage requirements for financial institutions

The BNB’s regulation of banking activity is designed to ensure the stability and security of the Bulgarian banking system while promoting economic growth and development.